DNA methylation is an epigenetic mechanism that plays a critical role in the repression of gene expression. Here, we show that DNA methyltransferase (DNMT) inhibition in hippocampal neurons results in activity-dependent demethylation of genomic DNA and a parallel decrease in the frequency of miniature EPSCs (mEPSCs), which in turn impacts neuronal excitability and network activity. Treatment with DNMT inhibitors reveals an activity-driven demethylation of brain-derived neurotrophic factor promoter I, which is mediated by synaptic activation of NMDA receptors, because it is susceptible to AP-5, a blocker of NMDA receptors. The specific effect of DNMT inhibition on spontaneous excitatory neurotransmission requires gene transcription and is occluded in the absence of the transcriptional repressor methyl-CpG-binding protein 2 (MeCP2). Interestingly, enhancing excitatory activity, in the absence of DNMT inhibitors, also produces similar decreases in DNA methylation and mEPSC frequency, suggesting a role for DNA methylation in the control of homeostatic synaptic plasticity. Furthermore, adding excess substrate for DNA methylation (S-adenosyl-l-methionine) rescues the suppression of mEPSCs by DNMT inhibitors in wild-type neurons, as well as the defect seen in MeCP2-deficient neurons. These results uncover a means by which NMDA receptor-mediated synaptic activity drives DNA demethylation within mature neurons and suppresses basal synaptic function.