DNA methylation promotes gene silencing, yet the Epstein-Barr virus immediate-early protein, BZLF1 (Z), converts the virus from the latent to the lytic form of infection even when the viral genome is highly methylated. Here we show that methylation of CpG motifs in Z-responsive elements of the viral BRLF1 immediate-early promoter enhances Z binding to, and activation of, this promoter. Demethylation of the viral genome impairs Z activation of lytic viral genes. Z is the first transcription factor that preferentially binds to, and activates, a methylated promoter. These results identify an unexpected mechanism by which Epstein-Barr virus circumvents the inhibitory effects of viral genome methylation.