DNA methylation and histone H1 mediate transcriptional silencing of genes and transposable elements, but how they interact is unclear. In plants and animals with mosaic genomic methylation, functionally mysterious methylation is also common within constitutively active housekeeping genes. Here, we show that H1 is enriched in methylated sequences, including genes, of Arabidopsis thaliana, yet this enrichment is independent of DNA methylation. Loss of H1 disperses heterochromatin, globally alters nucleosome organization, and activates H1-bound genes, but only weakly de-represses transposable elements. However, H1 loss strongly activates transposable elements hypomethylated through mutation of DNA methyltransferase MET1. Hypomethylation of genes also activates antisense transcription, which is modestly enhanced by H1 loss. Our results demonstrate that H1 and DNA methylation jointly maintain transcriptional homeostasis by silencing transposable elements and aberrant intragenic transcripts. Such functionality plausibly explains why DNA methylation, a well-known mutagen, has been maintained within coding sequences of crucial plant and animal genes.