How does one genome give rise to multiple, often markedly different, phenotypes in response to an environmental cue? This phenomenon, known as phenotypic plasticity, is common amongst plants and animals, but arguably the most striking examples are seen in insects. Well-known insect examples include seasonal morphs of butterfly wing patterns, sexual and asexual reproduction in aphids, and queen and worker castes of eusocial insects. Ultimately, we need to understand how phenotypic plasticity works at a mechanistic level; how do environmental signals alter gene expression, and how are changes in gene expression translated into novel morphology, physiology and behaviour? Understanding how plasticity works is of major interest in evolutionary-developmental biology and may have implications for understanding how insects respond to global change. It has been proposed that epigenetic mechanisms, specifically DNA methylation, are the key link between environmental cues and changes in gene expression. Here, we review the available evidence on the function of DNA methylation of insects, the possible role(s) for DNA methylation in phenotypic plasticity and also highlight key outstanding questions in this field as well as new experimental approaches to address these questions.