Epigenetic modification through DNA methylation is implicated in metabolic disease. Using whole-genome promoter methylation analysis of skeletal muscle from normal glucose-tolerant and type 2 diabetic subjects, we identified cytosine hypermethylation of peroxisome proliferator-activated receptor gamma (PPARgamma) coactivator-1 alpha (PGC-1alpha) in diabetic subjects. Methylation levels were negatively correlated with PGC-1alpha mRNA and mitochondrial DNA (mtDNA). Bisulfite sequencing revealed that the highest proportion of cytosine methylation within PGC-1alpha was found within non-CpG nucleotides. Non-CpG methylation was acutely increased in human myotubes by exposure to tumor necrosis factor-alpha (TNF-alpha) or free fatty acids, but not insulin or glucose. Selective silencing of the DNA methyltransferase 3B (DNMT3B), but not DNMT1 or DNMT3A, prevented palmitate-induced non-CpG methylation of PGC-1alpha and decreased mtDNA and PGC-1alpha mRNA. We provide evidence for PGC-1alpha hypermethylation, concomitant with reduced mitochondrial content in type 2 diabetic patients, and link DNMT3B to the acute fatty-acid-induced non-CpG methylation of PGC-1alpha promoter.