In this review, we discuss changes in the regulation of gene expression in the central nervous system (CNS) associated with DNA (cytosine-5) methylation, chromatin remodeling and post-translational covalent modifications of histones. During brain development, abnormal intrinsic or extrinsic cues may compromise epigenetic processes regulating neural stem cell proliferation and differentiation and thus directly or indirectly could contribute to altered epiphenotypes leading to psychiatric disorders. These mechanisms, that include chromatin remodeling and reversible changes in promoter methylation patterns, are largely expressed by terminally differentiated cortical GABAergic neurons. These neurons are unique among various brain cell subtypes because they express high levels of DNA-methyltransferase-1 (DNMT1). Moreover, DNMT1 expression is further increased in schizophrenia (SZ) and bipolar (BP) disorder brains. To unravel how this pathological DNMT1 overexpression induces GABAergic neuronal dysfunction in SZ and in other psychoses, we report on how alterations in methylation modify the expression of susceptible vulnerability genes such as reelin or GAD67 in these neurons. The results encourage the view that promoter hypermethylation in GABAergic neurons that occurs in SZ represents a testable target for novel therapeutic strategies to treat this disorder.