The human retinoblastoma gene (RB1) is imprinted; the mouse Rb1 gene is not. Imprinted expression of RB1 is due to differential methylation of a CpG island (CpG85), which is located in the pseudogene PPP1R26P1 in intron 2 of RB1. CpG85 serves as promoter for an alternative RB1 transcript, which is expressed from the unmethylated paternal allele only and is thought to suppress expression of the full-length RB1 transcript in cis. PPP1R26P1 contains another CpG island (CpG42), which is biallelically methylated. To determine the influence of PPP1R26P1 on RB1 expression, we generated an in vitro murine embryonic stem cell model by introducing human PPP1R26P1 into mouse Rb1. Next generation bisulfite sequencing of CpG85 and CpG42 revealed differences in their susceptibility to DNA methylation, gaining methylation at a median level of 4% and 18%, respectively. We showed binding of RNA polymerase II at and transcription from the unmethylated CpG85 in PPP1R26P1 and observed reduced expression of full-length Rb1 from the targeted allele. Our results identify human PPP1R26P1 as a cis-repressive element and support a connection between retrotransposition of PPP1R26P1 into human RB1 and the reduced expression of RB1 on the paternal allele.