Previous studies have shown two homologous chromodomain modules in the HP1 and Polycomb proteins exhibit discriminatory binding to related methyllysine residues (embedded in ARKS motifs) of the histone H3 tail. Methylated ARKS/T motifs have recently been identified in other chromatin factors (e.g., linker histone H1.4 and lysine methyltransferase G9a). These are thought to function as peripheral docking sites for the HP1 chromodomain. In vertebrates, HP1-like chromdomains are also present in the chromodomain Y chromosome (CDY) family of proteins adjacent to a putative catalytic motif. The human genome encodes three CDY family proteins, CDY, CDYL, and CDYL2. These have putative functions ranging from establishment of histone H4 acetylation during spermiogenesis to regulation of transcription co-repressor complexes. To delineate the biochemical functions of the CDY family chromodomains, we analyzed their specificity of methyllysine recognition. We detected substantial differences among these factors. The CDY chromodomain exhibits discriminatory binding to lysine methylated ARKS/T motifs, whereas the CDYL2 chromodomain binds with comparable strength to multiple ARKS/T motifs. Interestingly, subtle amino acid changes in the CDYL chromodomain prohibit such binding interactions in vitro and in vivo. However, point mutations can rescue binding. In support of the in vitro binding properties of the chromodomains, the full-length CDY family proteins exhibit substantial variability in chromatin localization. Our studies underscore the significance of subtle sequence differences in a conserved signaling module for diverse epigenetic regulatory pathways.