Down syndrome is associated with genome-wide perturbation of gene expression, which may be mediated by epigenetic changes. We perform an epigenome-wide association study on neonatal bloodspots comparing 196 newborns with Down syndrome and 439 newborns without Down syndrome, adjusting for cell-type heterogeneity, which identifies 652 epigenome-wide significant CpGs (P < 7.67 × 10^-8) and 1,052 differentially methylated regions. Differential methylation at promoter/enhancer regions correlates with gene expression changes in Down syndrome versus non-Down syndrome fetal liver hematopoietic stem/progenitor cells (P < 0.0001). The top two differentially methylated regions overlap RUNX1 and FLI1, both important regulators of megakaryopoiesis and hematopoietic development, with significant hypermethylation at promoter regions of these two genes. Excluding Down syndrome newborns harboring preleukemic GATA1 mutations (N = 30), identified by targeted sequencing, has minimal impact on the epigenome-wide association study results. Down syndrome has profound, genome-wide effects on DNA methylation in hematopoietic cells in early life, which may contribute to the high frequency of hematological problems, including leukemia, in children with Down syndrome.