Human papillomavirus (HPV) infection distinctly alters methylation patterns in HPV-associated cancer. We have recently reported that HPV E7-dependent promoter hypermethylation leads to downregulation of the chemokine CXCL14 and suppression of antitumor immune responses. To investigate the extent of gene expression dysregulated by HPV E7-induced DNA methylation, we analyzed parallel global gene expression and DNA methylation using normal immortalized keratinocyte lines, NIKS, NIKS-16, NIKS-18, and NIKS-16∆E7. We show that expression of the MHC class I genes is downregulated in HPV-positive keratinocytes in an E7-dependent manner. Methylome analysis revealed hypermethylation at a distal CpG island (CGI) near the HLA-E gene in NIKS-16 cells compared to either NIKS cells or NIKS-16∆E7 cells, which lack E7 expression. The HLA-E CGI functions as an active promoter element which is dramatically repressed by DNA methylation. HLA-E protein expression on cell surface is downregulated by high-risk HPV16 and HPV18 E7 expression, but not by low-risk HPV6 and HPV11 E7 expression. Conversely, demethylation at the HLA-E CGI restores HLA-E protein expression in HPV-positive keratinocytes. Because HLA-E plays an important role in antiviral immunity by regulating natural killer and CD8+ T cells, epigenetic downregulation of HLA-E by high-risk HPV E7 may contribute to virus-induced immune evasion during HPV persistence.