Mitochondrial DNA (mtDNA) has been reported to contain 5-methylcytosine (5mC) at CpG dinucleotides, as in the nuclear genome, but neither the mechanism generating mtDNA methylation nor its functional significance is known. We now report the presence of 5-hydroxymethylcytosine (5hmC) as well as 5mC in mammalian mtDNA, suggesting that previous studies underestimated the level of cytosine modification in this genome. DNA methyltransferase 1 (DNMT1) translocates to the mitochondria, driven by a mitochondrial targeting sequence located immediately upstream of the commonly accepted translational start site. This targeting sequence is conserved across mammals, and the encoded peptide directs a heterologous protein to the mitochondria. DNMT1 is the only member of the three known catalytically active DNA methyltransferases targeted to the mitochondrion. Mitochondrial DNMT1 (mtDNMT1) binds to mtDNA, proving the presence of mtDNMT1 in the mitochondrial matrix. mtDNMT1 expression is up-regulated by NRF1 and PGC1α, transcription factors that activate expression of nuclear-encoded mitochondrial genes in response to hypoxia, and by loss of p53, a tumor suppressor known to regulate mitochondrial metabolism. Altered mtDNMT1 expression asymmetrically affects expression of transcripts from the heavy and light strands of mtDNA. Hence, mtDNMT1 appears to be responsible for mtDNA cytosine methylation, from which 5hmC is presumed to be derived, and its expression is controlled by factors that regulate mitochondrial function.