To gain insights into the interplay between DNA methylation and gene regulation we generated a basepair resolution reference map of the mouse methylome in stem cells and neurons. High genome coverage allowed for a novel quantitative analysis of local methylation states, which identified Low Methylated Regions (LMR) with an average methylation of 30%. These regions are evolutionary conserved, reside outside of CpG islands and distal to promoters. They represent regulatory regions evidenced by their DNaseI hypersensitivity and chromatin marks of enhancer elements. LMRs are occupied by transcription factors (TF) and their reduced methylation requires TF binding while introduction of TF binding sites creates LMRs de novo. This dependency on TF activity is further evident when comparing the methylomes of embryonic stem cells and derived neuronal cells. LMRs present in both cell types are occupied by broadly expressed factors, while LMRs present at only one state are occupied by cell-type specific TFs. Methylome data can thus enhance the prediction of occupied TF binding sites and identification of active regulatory regions genome-wide. Our study provides reference methylomes for the mouse at two cell states, identifies a novel and highly dynamic feature of the epigenome that defines distal regulatory elements and shows that transcription factor binding dynamically shapes mammalian methylomes. Whole genome shotgun bisulfite sequencing of mouse embryonic stem (ES) cells and derived neuronal progenitors (NP). CTCF ChIP sequencing in mouse ES and Dnmt1/3a/3b triple knock-out ES (TKO) cells. H3K4me1, H3K4me2 and H3K27me3 ChIP sequencing in mouse ES cells. Pax6 ChIP-chip in mouse ES cells.