MBD1, a member of the methyl-CpG-binding domain family of proteins, has been reported to repress transcription of methylated and unmethylated promoters. As some MBD1 isoforms contain two DNA-binding domains-an MBD, which recognizes methylated DNA; and a CXXC3 zinc finger, which binds unmethylated CpG-it is unclear whether these two domains function independently of each other or if they cooperate in facilitating recruitment of MBD1 to particular genomic loci. In this report we investigate DNA-binding specificity of MBD and CXXC3 domains in vitro and in vivo. We find that the methyl-CpG-binding domain of MBD1 binds more efficiently to methylated DNA within a specific sequence context. We identify genes that are targeted by MBD1 in human cells and demonstrate that a functional MBD domain is necessary and sufficient for recruitment of MBD1 to specific sites at these loci, while DNA binding by the CXXC3 motif is largely dispensable. In summary, the binding preferences of MBD1, although dependent upon the presence of methylated DNA, are clearly distinct from those of other methyl-CpG-binding proteins, MBD2 and MeCP2.