Recent work has highlighted a possible role for altered epigenetic modifications, including differential DNA methylation, in susceptibility to psychiatric illness. Here, we investigate blood-based DNA methylation in a large family where a balanced translocation between chromosomes 1 and 11 shows genome-wide significant linkage to psychiatric illness. Genome-wide DNA methylation was profiled in whole-blood-derived DNA from 41 individuals using the Infinium HumanMethylation450 BeadChip (Illumina Inc., San Diego, CA). We found significant differences in DNA methylation when translocation carriers (n = 17) were compared to related non-carriers (n = 24) at 13 loci. All but one of the 13 significant differentially methylated positions (DMPs) mapped to the regions surrounding the translocation breakpoints. Methylation levels of five DMPs were associated with genotype at SNPs in linkage disequilibrium with the translocation. Two of the five genes harbouring significant DMPs, DISC1 and DUSP10, have been previously shown to be differentially methylated in schizophrenia. Gene Ontology analysis revealed enrichment for terms relating to neuronal function and neurodevelopment among the genes harbouring the most significant DMPs. Differentially methylated region (DMR) analysis highlighted a number of genes from the MHC region, which has been implicated in psychiatric illness previously through genetic studies. We show that inheritance of a translocation linked to major mental illness is associated with differential DNA methylation at loci implicated in neuronal development/function and in psychiatric illness. As genomic rearrangements are over-represented in individuals with psychiatric illness, such analyses may be valuable more widely in the study of these conditions.