Methyl-CpG binding proteins play an essential role in translating DNA methylation marks into a downstream transcriptional response, which has implications for both normal cell function as well as disease. Although for many of these proteins, a detailed mechanistic understanding for how this cellular process is mediated remains to be determined. ZBTB38 is an under-characterized member of the zinc finger (ZF) family of methyl-CpG binding proteins. Functional knowledge has been gained for its conserved methylated DNA binding N-terminal ZF region; however, a specific role for the C-terminal set of five ZFs remains to be elucidated. Here we demonstrate for the first time that a subset of the C-terminal ZBTB38 ZFs exhibit high-affinity DNA interactions and that preferential targeting of the consensus DNA site is methyl specific. Utilizing a hybrid approach, a model for the C-terminal ZBTB38 ZFs in complex with its cognate DNA target is proposed, providing insight into a possible novel mode of methylated DNA recognition. Furthermore, it is shown that the C-terminal ZFs of ZBTB38 can directly occupy promoters harboring the newly identified sequence motif in cell in a methyl-dependent manner and, depending on the gene context, contribute to modulating transcriptional response. Combined, these findings provide evidence for a key and novel physiological function for the C-terminal ZF domain of ZBTB38.