Epigenetic states are stably propagated in eukaryotes. In plants, DNA methylation patterns are faithfully inherited over many generations but it is unknown how the dynamic activities of cytosine DNA methyltransferases and 5-methylcytosine DNA glycosylases interact to maintain epigenetic homeostasis. Here we show that a methylation-sensing gene regulatory circuit centered on a 5-methylcytosine DNA glycosylase gene is required for long-term epigenetic fidelity in Arabidopsis. Disrupting this circuit causes widespread methylation losses and abnormal phenotypes that progressively worsen over generations. In heterochromatin, these losses are counteracted such that methylation returns to a normal level over four generations. However, thousands of loci in euchromatin progressively lose DNA methylation between generations and remain unmethylated. We conclude that an actively maintained equilibrium between methylation and demethylation activities is required to ensure long-term stable inheritance of epigenetic information.