BACKGROUND: Cytosine DNA methylation is widely described as a transcriptional repressive mark with the capacity to silence promoters. Epigenome engineering techniques enable direct testing of the effect of induced DNA methylation on endogenous promoters; however, the downstream effects have not yet been comprehensively assessed. RESULTS: Here, we simultaneously induce methylation at thousands of promoters in human cells using an engineered zinc finger-DNMT3A fusion protein, enabling us to test the effect of forced DNA methylation upon transcription, chromatin accessibility, histone modifications, and DNA methylation persistence after the removal of the fusion protein. We find that transcriptional responses to DNA methylation are highly context-specific, including lack of repression, as well as cases of increased gene expression, which appears to be driven by the eviction of methyl-sensitive transcriptional repressors. Furthermore, we find that some regulatory networks can override DNA methylation and that promoter methylation can cause alternative promoter usage. DNA methylation deposited at promoter and distal regulatory regions is rapidly erased after removal of the zinc finger-DNMT3A fusion protein, in a process combining passive and TET-mediated demethylation. Finally, we demonstrate that induced DNA methylation can exist simultaneously on promoter nucleosomes that possess the active histone modification H3K4me3, or DNA bound by the initiated form of RNA polymerase II. CONCLUSIONS: These findings have important implications for epigenome engineering and demonstrate that the response of promoters to DNA methylation is more complex than previously appreciated.