DNA methylation (mC) is a major epigenetic modification of vertebrate genomes usually associated with transcriptional silencing. Recent studies suggest that mC and its oxidative products such as 5-hydroxymethylcytosine (hmC) can recruit different DNA-binding proteins including pluripotency factors. This could partly explain why the necessity of mC for transcriptional regulation is highly dynamic during early vertebrate/mammalian development. By using transgenic approaches we demonstrate that mC in zebrafish (Danio rerio) displays reduced repression potential during pluripotency stages despite the presence of mC silencing pathway components. To further explore these findings and identify potentially novel mC readers, we employed mC/hmC affinity precipitation combined with quantitative mass spectrometry. Comparisons of mC readers identified in zebrafish embryos and mouse cell lines suggest that the absence of the methylated DNA binding protein (MBD2) from methylated DNA during pluripotency could be causative for this phenomenon. Indeed, overexpression of MBD2 in early stage embryos efficiently restores mC-mediated transcriptional repression. Furthermore, we observe strong inter-species conservation in protein families that associate with mC and hmC during embryogenesis and find an mC-dependent enrichment of zinc finger proteins during early embryonic stages, followed by the presence of differentiation factors such as Hox proteins on methylated DNA during organogenesis. hmC recruits a large number of transcriptional regulators and DNA repair proteins in both mouse cell lines and zebrafish embryos, thereby providing evidence that the DNA damage response has a conserved role in active DNA demethylation despite the differences in DNA methylation remodeling observed between mammals and lower vertebrates. Lastly, we identify Foxk group proteins as constitutive, evolutionarily conserved mC interactors and demonstrate that their depletion perturbs normal development and results in subsequent embryonic death. Overall, these data indicate that a diverse and dynamic set of proteins that ‘read’ DNA methylation are present during early vertebrate development, and the repressive potential of DNA methylation is highly affected by the cellular complement of expressed/bound readers.