DNA methyltransferase 1 (DNMT1) is a major epigenetic regulator of the formation of large macromolecular complexes that repress human γ-globin expression by maintaining DNA methylation. However, very little is known about the association of DNMT1 variants with β-thalassemia phenotypes. We systematically investigated associations between variants in DNMT1 and phenotypes in 1,142 β-thalassemia subjects and identified a novel missense mutation (c.2633G>A, S878F) in the bromo-adjacent homology-1 (BAH1) domain of DNMT1. We functionally characterized this mutation in CD34+ cells from patientsand engineered HuDEP-2 mutant cells. Our results demonstrate that DNMT1 phosphorylation is abrogated by substitution of serine with phenylalanine at position 878, resulting in lower stability and loss of catalytic activity. S878F mutation also attenuated the interactions of DNMT1 with BCL11A, GATA1 and HDAC1/2 and reduced the recruitment of DNMT1 to the HBG promoters, leading to epigenetic de-repression of γ-globin expression. By analyzing the F-cell pattern, we demonstrated that the effect of DNMT1 mutation on increased fetal hemoglobin (HbF) is heterocellular. Furthermore, introduction of S878F mutation into erythroid cells by CRISPR-Cas9 recapitulated γ-globin reactivation. Thus, the natural S878F DNMT1 mutation is a novel modulator of HbF synthesis and represents a potential new therapeutic target for β-hemoglobinopathies.