Epigenetic alterations may provide important insights into gene-environment interaction in inflammatory bowel disease (IBD). Here we observe epigenome-wide DNA methylation differences in 240 newly-diagnosed IBD cases and 190 controls. These include 439 differentially methylated positions (DMPs) and 5 differentially methylated regions (DMRs), which we study in detail using whole genome bisulphite sequencing. We replicate the top DMP (RPS6KA2) and DMRs (VMP1, ITGB2 and TXK) in an independent cohort. Using paired genetic and epigenetic data, we delineate methylation quantitative trait loci; VMP1/microRNA-21 methylation associates with two polymorphisms in linkage disequilibrium with a known IBD susceptibility variant. Separated cell data shows that IBD-associated hypermethylation within the TXK promoter region negatively correlates with gene expression in whole-blood and CD8+ T cells, but not other cell types. Thus, site-specific DNA methylation changes in IBD relate to underlying genotype and associate with cell-specific alteration in gene expression.