Diabetic embryopathy (DE) describes a spectrum of birth defects associated with a teratogenic exposure to maternal diabetes in utero. These defects strongly overlap the phenotypes of known genetic syndromes; however, the pathogenic mechanisms underlying DE remain uncertain and there are no definitive tests that distinguish the diagnosis. Here, we explore the potential of DNA methylation as both a diagnostic biomarker and a means of informing disease pathogenesis in DE. Capture-based bisulfite sequencing was used to compare patterns of DNA methylation at 2,800,516 sites genome-wide in seven DE neonates and 11 healthy neonates, including five with in utero diabetes exposure. DE infants had significantly lower global DNA methylation (ANOVA, Tukey HSD p=0.045) than diabetes-unexposed, healthy controls (UH), with multiple sites showing large (mean methylation difference = 16.6%) and significant (p<0.001) differential methylation between the two groups. We found that a subset of 237 highly differentially methylated loci could accurately distinguish DE infants from both UH and diabetes-exposed healthy infants (sensitivity 80% -100%). Differentially methylated sites were enriched in intergenic (p<3.52x10 -15 ) and intronic (p<0.001) regions found proximal to genes either associated with Mendelian syndromes that overlap the DE phenotype (e.g. TRIO, ANKRD11), or known to influence early organ development (e.g. BRAX1, RASA3). Further, by integrating information on cis-sequence variation, we found that 39.3% of loci with evidence for allele-specific methylation also showed differential methylation between DE and controls.Our study suggests a role for aberrant DNA methylation and cis-sequence variation in the pathogenesis of DE, and highlights the diagnostic potential of DNA methylation for teratogenic birth defects.