The contribution of epigenetic variation to phenotypic variation is unclear. Imprinted genes, because of their strong association with epigenetic modifications, represent an opportunity for the discovery of such phenomena. In mammals and flowering plants, a subset of genes are expressed from only one parental allele in a process called gene imprinting. Imprinting is associated with differential DNA methylation and chromatin modifications between parental alleles. In flowering plants imprinting occurs in a seed tissue - endosperm. Proper endosperm development is essential for the production of viable seeds. We previously showed that in Arabidopsis thaliana intraspecific imprinting variation is correlated with naturally occurring DNA methylation polymorphisms. Here, we investigated the mechanisms and function of allele-specific imprinting of the class IV homeodomain leucine zipper (HD-ZIP) transcription factor HDG3. In imprinted strains, HDG3 is expressed primarily from the methylated paternally inherited allele. We manipulated the methylation state of endogenous HDG3 in a non-imprinted strain and demonstrated that methylation of a proximal transposable element is sufficient to promote HDG3 expression and imprinting. Gain of HDG3 imprinting was associated with earlier endosperm cellularization and changes in seed weight. These results indicate that epigenetic variation alone is sufficient to explain imprinting variation and demonstrate that epialleles can underlie variation in seed development phenotypes.