UHRF1 is a histone- and DNA-binding E3 ubiquitin ligase that functions with DNMT1 to maintain mammalian DNA methylation. UHRF1 facilitates DNMT1 recruitment to replicating chromatin through a coordinated mechanism involving histone and DNA recognition and histone ubiquitination. UHRF2 shares structural homology with UHRF1, but surprisingly lacks functional redundancy to facilitate DNA methylation maintenance. Molecular mechanisms uncoupling UHRF2 from DNA methylation maintenance are poorly defined. Through comprehensive and comparative biochemical analysis of recombinant human UHRF1 and UHRF2 reader and writer activities, we reveal conserved modes of histone PTM recognition but divergent DNA binding properties. While UHRF1 and UHRF2 diverge in their affinities toward hemi-methylated DNA, we surprisingly show that both hemi-methylated and hemi-hydroxymethylated DNA oligonucleotides stimulate UHRF2 ubiquitin ligase activity toward histone H3 peptide substrates. This is the first example of an E3 ligase allosterically regulated by DNA hydroxymethylation. However, UHRF2 is not a productive histone E3 ligase toward purified mononucleosomes, suggesting UHRF2 has an intra-domain architecture distinct from UHRF1 that is conformationally constrained when bound to chromatin. Collectively, our studies reveal that uncoupling of UHRF2 from the DNA methylation maintenance program is linked to differences in the molecular readout of chromatin signatures that connect UHRF1 to ubiquitination of histone H3.