Sporadic mutations in the hMeCP2 gene, coding for a protein that preferentially binds symmetrically methylated CpGs, result in the severe neurological disorder Rett syndrome (RTT). In the present work, employing a wide range of experimental approaches, we shed new light on the many levels of MeCP2 interaction with DNA and chromatin. We show that strong methylation-independent as well as methylation-dependent binding by MeCP2 is influenced by DNA length. Although MeCP2 is strictly monomeric in solution, its binding to DNA is cooperative, with dimeric binding strongly correlated with methylation density, and strengthened by nearby A/T repeats. Dimeric binding is abolished in the F155S and R294X severe RTT mutants. MeCP2 also binds chromatin in vitro, resulting in compaction-related changes in nucleosome architecture that resemble the classical zigzag motif induced by histone H1 and considered important for 30-nm-fiber formation. In vivo chromatin binding kinetics and in vitro steady-state nucleosome binding of both MeCP2 and H1 provide strong evidence for competition between MeCP2 and H1 for common binding sites. This suggests that chromatin binding by MeCP2 and H1 in vivo should be viewed in the context of competitive multifactorial regulation.