The roles of DNA methyltransferase-2 (DNMT2) enzymes are controversial; whether DNMT2 functions primarily as a nuclear DNA methyltransferase or as a cytoplasmic tRNA methyltransferase, and whether DNMT2 activity impacts development, as dnmt2 mutant mice or Drosophila lack phenotypes. Here we show that morpholino knockdown of Dnmt2 protein in zebrafish embryos confers differentiation defects in particular organs, including the retina, liver, and brain. Importantly, proper organ differentiation required Dnmt2 activity in the cytoplasm, not in the nucleus. Furthermore, zebrafish Dnmt2 methylates an RNA species of approximately 80 bases, consistent with tRNA methylation. Thus, Dnmt2 promotes zebrafish development, likely through cytoplasmic RNA methylation.