Histone methylation and DNA methylation cooperatively regulate chromatin structure and gene activity. How these two systems coordinate with each other remains unclear. Here we study the biological function of lysine-specific demethylase 1 (LSD1, also known as KDM1 and AOF2), which has been shown to demethylate histone H3 on lysine 4 (H3K4) and lysine 9 (H3K9). We show that LSD1 is required for gastrulation during mouse embryogenesis. Notably, targeted deletion of the gene encoding LSD1 (namely, Aof2) in embryonic stem (ES) cells induces progressive loss of DNA methylation. This loss correlates with a decrease in DNA methyltransferase 1 (Dnmt1) protein, as a result of reduced Dnmt1 stability. Dnmt1 protein is methylated in vivo, and its methylation is enhanced in the absence of LSD1. Furthermore, Dnmt1 can be methylated by Set7/9 (also known as KMT7) and demethylated by LSD1 in vitro. Our findings suggest that LSD1 demethylates and stabilizes Dnmt1, thus providing a previously unknown mechanistic link between the histone and DNA methylation systems.