Cytosine methylation, a common form of DNA modification that antagonizes transcription, is found at transposons and repeats in vertebrates, plants and fungi. Here we have mapped DNA methylation in the entire Arabidopsis thaliana genome at high resolution. DNA methylation covers transposons and is present within a large fraction of A. thaliana genes. Methylation within genes is conspicuously biased away from gene ends, suggesting a dependence on RNA polymerase transit. Genic methylation is strongly influenced by transcription: moderately transcribed genes are most likely to be methylated, whereas genes at either extreme are least likely. In turn, transcription is influenced by methylation: short methylated genes are poorly expressed, and loss of methylation in the body of a gene leads to enhanced transcription. Our results indicate that genic transcription and DNA methylation are closely interwoven processes.