Plant genomes contain numerous transposable elements (TEs), and many hypotheses on the evolutionary drivers that restrict TE activity have been postulated. Few models, however, have focused on the evolutionary epigenomic interaction between the plant host and its TE. The host genome recruits epigenetic factors, such as methylation, to silence TEs but methylation can spread beyond the TE sequence and influence the expression of nearby host genes. In this study, we investigated this epigenetic trade-off between TE and proximal host gene silencing by studying the epigenomic regulation of repressing long terminal repeat (LTR) retrotransposons (RTs) inOryza sativa. Results showed significant evidence of methylation spreading originating from the LTR-RT sequences, and the extent of spreading was dependent on five factors: 1) LTR-RT family, 2) time since the LTR-RT insertion, 3) recombination rate of the LTR-RT region, 4) level of LTR-RT sequence methylation, and 5) chromosomal location. Methylation spreading had negative effects by reducing host gene expression, but only on host genes with LTR-RT inserted in its introns. Our results also suggested high levels of LTR-RT methylation might have a role in suppressing TE-mediated deleterious ectopic recombination. In the end, despite the methylation spreading, no strong epigenetic trade-off was detected and majority of LTR-RT may have only minor epigenetic effects on nearby host genes.