The human genome encodes some 350 Krüppel-associated box (KRAB) domain-containing zinc-finger proteins (KZFPs), the products of a rapidly evolving gene family that has been traced back to early tetrapods. The function of most KZFPs is unknown, but a few have been demonstrated to repress transposable elements in embryonic stem (ES) cells by recruiting the transcriptional regulator TRIM28 and associated mediators of histone H3 Lys9 trimethylation (H3K9me3)-dependent heterochromatin formation and DNA methylation. Depletion of TRIM28 in human or mouse ES cells triggers the upregulation of a broad range of transposable elements, and recent data based on a few specific examples have pointed to an arms race between hosts and transposable elements as an important driver of KZFP gene selection. Here, to obtain a global view of this phenomenon, we combined phylogenetic and genomic studies to investigate the evolutionary emergence of KZFP genes in vertebrates and to identify their targets in the human genome. First, we unexpectedly reassigned the root of the family to a common ancestor of coelacanths and tetrapods. Second, although we confirmed that the majority of KZFPs bind transposable elements and pinpoint cases of ongoing co-evolution, we found that most of their transposable element targets have lost all transposition potential. Third, by examining the interplay between human KZFPs and other transcriptional modulators, we obtained evidence that KZFPs exploit evolutionarily conserved fragments of transposable elements as regulatory platforms long after the arms race against these genetic invaders has ended. Together, our results demonstrate that KZFPs partner with transposable elements to build a largely species-restricted layer of epigenetic regulation.