Abstract Transcriptional silencing of retrotransposons via DNA methylation is paramount for mammalian fertility and reproductive fitness. During germ cell development, most mammalian species utilize the de novo DNA methyltransferases DNMT3A and DNMT3B to establish DNA methylation patterns. However, many rodent species deploy a third enzyme, DNMT3C, to selectively methylate the promoters of young retrotransposon insertions in their germline. The evolutionary forces that shaped DNMT3C’s unique function are unknown. Using a phylogenomic approach, we confirm here that Dnmt3C arose through a single duplication of Dnmt3B that occurred ∼60 Ma in the last common ancestor of muroid rodents. Importantly, we reveal that DNMT3C is composed of two independently evolving segments: the latter two-thirds have undergone recurrent gene conversion with Dnmt3B, whereas the N-terminus has instead evolved under strong diversifying selection. We hypothesize that positive selection of Dnmt3C is the result of an ongoing evolutionary arms race with young retrotransposon lineages in muroid genomes. Interestingly, although primates lack DNMT3C, we find that the N-terminus of DNMT3A has also evolved under diversifying selection. Thus, the N-termini of two independent de novo methylation enzymes have evolved under diversifying selection in rodents and primates. We hypothesize that repression of young retrotransposons might be driving the recurrent innovation of a functional domain in the N-termini on germline DNMT3s in mammals.