Abstract Background Cytosine DNA methylation (5mC) is an epigenetic modification that is important to genome stability and regulation of gene expression. Perturbations of 5mC have been implicated as a cause of phenotypic variation among plants regenerated through in vitro culture systems. However, the pattern of change in 5mC and its functional role with respect to gene expression, are poorly understood at the genome scale. A fuller understanding of how 5mC changes during in vitro manipulation may aid the development of methods for reducing or amplifying the mutagenic and epigenetic effects of in vitro culture and plant transformation. Results We investigated the in vitro methylome of the model tree species Populus trichocarpa in a system that mimics routine methods for regeneration and plant transformation in the genus Populus (poplar). Using methylated DNA immunoprecipitation followed by high-throughput sequencing (MeDIP-seq), we compared the methylomes of internode stem segments from micropropagated explants, dedifferentiated calli, and internodes from regenerated plants. We found that more than half (56%) of the methylated portion of the genome appeared to be differentially methylated among the three tissue types. Surprisingly, gene promoter methylation varied little among tissues, however, the percentage of body-methylated genes increased from 9% to 14% between explants and callus tissue, then decreased to 8% in regenerated internodes. Forty-five percent of differentially-methylated genes underwent transient methylation, becoming methylated in calli, and demethylated in regenerants. These genes were more frequent in chromosomal regions with higher gene density. Comparisons with an expression microarray dataset showed that genes methylated at both promoters and gene bodies had lower expression than genes that were unmethylated or only promoter-methylated in all three tissues. Four types of abundant transposable elements showed their highest levels of 5mC in regenerated internodes. Conclusions DNA methylation varies in a highly gene- and chromosome-differential manner during in vitro differentiation and regeneration. 5mC in redifferentiated tissues was not reset to that in original explants during the study period. Hypermethylation of gene bodies in dedifferentiated cells did not interfere with transcription, and may serve a protective role against activation of abundant transposable elements.