The legume-Rhizobium symbiosis leads to the formation of a new organ, the root nodule, involving coordinated and massive induction of specific genes. Several genes controlling DNA methylation are spatially regulated within the Medicago truncatula nodule, notably the demethylase gene, DEMETER (DME), which is mostly expressed in the differentiation zone. Here, we show that MtDME is essential for nodule development and regulates the expression of 1,425 genes, some of which are critical for plant and bacterial cell differentiation. Bisulphite sequencing coupled to genomic capture enabled the identification of 474 regions that are differentially methylated during nodule development, including nodule-specific cysteine-rich peptide genes. Decreasing DME expression by RNA interference led to hypermethylation and concomitant downregulation of 400 genes, most of them associated with nodule differentiation. Massive reprogramming of gene expression through DNA demethylation is a new epigenetic mechanism controlling a key stage of indeterminate nodule organogenesis during symbiotic interactions.