Transposable elements are entangled in a constant evolutionary arms race with their host genomes, constantly evolving ways to evade host silencing mechanisms. One silencing mechanism used by many distantly related eukaryotes is dependent on cytosine methylation, an epigenetic mark deposited by C5 cytosine methyltransferases (CMTs). Therefore, it is expected transposable elements would acquire mechanisms to escape from being targeted by cytosine methylation. Here we report how two distantly related eukaryotic lineages have incorporated CMTs into the coding regions of distinct retrotransposon classes. Three of these events have occurred in the dinoflagellates of the genus Symbiodinium, where these CMT-encoding retrotransposons show hundreds of insertions. In a case of convergent evolution, the charophyte Klebsormidium nitens shows an independent expansion of CMT encoding retrotransposons. Concomitantly, we find that Symbiodinium genomes show cytosine methylation patterns unlike any other eukaryote with most of the genome hypermethylated in CpGs, while targeted CH methylation accumulates on transposable elements. Similarly, K. nitens shows CHH and CHG targeted methylation on repressed transposable elements, while CpG methylation is concentrated in gene bodies and transposable elements. Furthermore, we demonstrate the ability of retrotransposon CMTs to de novo methylate CpGs, indicating a putative role in mimicking retrotranscribed DNA as host active genomic DNA. Our results show an unprecedented example of how retrotransposons incorporate host-derived genes involved in DNA methylation as a source of adaptation to their host epigenomic environments. Overall design: Profiling of gene expression and cytosine methylation of Symbiodinium kawagutii and Symbiodinium minutum in two temperature treatments. Profiling of cytosine methylation of Klebsormidium nitens in vegetative growth. Profiling of cytosine methylation of transformant budding yeast lines in duplicates.