Mutations in the gene encoding the methyl-CG binding protein MeCP2 cause neurological disorders including Rett syndrome. The di-nucleotide methyl-CG (mCG) is the canonical MeCP2 DNA recognition sequence, but additional targets including non-methylated sequences have been reported. Here we use brain-specific depletion of DNA methyltransferase to show that DNA methylation is the primary determinant of MeCP2 binding in mouse brain. In vitro and in vivo analyses reveal that MeCP2 binding to non-CG methylated sites in brain is largely confined to the tri-nucleotide sequence mCAC. Structural modeling suggests that mCG and mCAC may be interchangeable as minimal structural perturbation of MeCP2 accompanies binding. MeCP2 binding to chromosomal DNA in mouse brain is proportional to mCG + mCAC density and defines domains within which transcription is sensitive to MeCP2 occupancy. The results suggest that MeCP2 interprets patterns of mCAC and mCG in the brain to negatively modulate transcription of genes critical for neuronal function.