Mammalian CXXC finger protein 1 (Cfp1) is a DNA-binding protein that is a component of the Setd1 histone methyltransferase complexes and is a critical epigenetic regulator of both histone and cytosine methylation. Murine embryonic stem (ES) cells lacking Cfp1 exhibit a loss of histone H3-Lys4 tri-methylation (H3K4me3) at many CpG islands, and a mis-localization of this epigenetic mark to heterochromatic sub-nuclear domains.Furthermore, these cells fail to undergo cellular differentiation in vitro. These defects are rescued upon introduction of a Cfp1-expression vector. Cfp1 contains an N-terminal plant homeodomain (PHD), a motif frequently observed in chromatin associated proteins that functions as a reader module of histone marks. Here, we report that the Cfp1 PHD domain directly and specifically binds to histone H3K4me1/me2/me3 marks. Introduction of individual mutations at key Cfp1 PHD residues (Y28, D44, or W49) ablates this histone interaction both in vitro and in vivo. The W49A point mutation does not affect the ability of Cfp1 to rescue appropriate restriction of histone H3K4me3 to euchromatic subnuclear domains or in vitro cellular differentiation in Cfp1-null ES cells. Similarly, a mutated form of Cfp1 that lacks DNA-binding activity (C169A) rescues in vitro cellular differentiation. However, rescue of Cfp1-null ES cells with a double mutant form of Cfp1 (W49A, C169A) results in partially defective in vitro differentiation. These data define the Cfp1 PHD domain as a reader of histone H3K4me marks and provide evidence that this activity is involved in the regulation of lineage commitment in ES cells.