Immunodeficiency, centromeric instability and facial anomalies type I (ICF1) syndrome is a rare genetic disease caused by mutations in DNA methyltransferase (DNMT) 3B, a de novo DNA methyltransferase. However, the molecular basis of how DNMT3B deficiency leads to ICF1 pathogenesis is unclear. Induced pluripotent stem cell (iPSC) technology facilitates the study of early human developmental diseases via facile in vitro paradigms. Here, we generate iPSCs from ICF Type 1 syndrome patient fibroblasts followed by directed differentiation of ICF1-iPSCs to mesenchymal stem cells (MSCs). By performing genome-scale bisulfite sequencing, we find that DNMT3B-deficient iPSCs exhibit global loss of non-CG methylation and select CG hypomethylation at gene promoters and enhancers. Further unbiased scanning of ICF1-iPSC methylomes also identifies large megabase regions of CG hypomethylation typically localized in centromeric and subtelomeric regions. RNA sequencing of ICF1 and control iPSCs reveals abnormal gene expression in ICF1-iPSCs relevant to ICF syndrome phenotypes, some directly associated with promoter or enhancer hypomethylation. Upon differentiation of ICF1 iPSCs to MSCs, we find virtually all CG hypomethylated regions remained hypomethylated when compared with either wild-type iPSC-derived MSCs or primary bone-marrow MSCs. Collectively, our results show specific methylome and transcriptome defects in both ICF1-iPSCs and differentiated somatic cell lineages, providing a valuable stem cell system for further in vitro study of the molecular pathogenesis of ICF1 syndrome. GEO accession number: GSE46030.