5-Methylcytosine (5mC) is a widespread silencing mechanism that controls genomic parasites. In eukaryotes, 5mC has gained complex roles in gene regulation beyond parasite control, yet 5mC has also been lost in many lineages. The causes for 5mC retention and its genomic consequences are still poorly understood. Here, we show that the protist closely related to animals Amoebidium appalachense features both transposon and gene body methylation, a pattern reminiscent of invertebrates and plants. Unexpectedly, hypermethylated genomic regions in Amoebidium derive from viral insertions, including hundreds of endogenized giant viruses, contributing 14% of the proteome. Using a combination of inhibitors and genomic assays, we demonstrate that 5mC silences these giant virus insertions. Moreover, alternative Amoebidium isolates show polymorphic giant virus insertions, highlighting a dynamic process of infection, endogenization, and purging. Our results indicate that 5mC is critical for the controlled coexistence of newly acquired viral DNA into eukaryotic genomes, making Amoebidium a unique model to understand the hybrid origins of eukaryotic DNA.