DNA methylation is an epigenetic mechanism that play an important role in gene regulation in response to environmental conditions. The understanding of DNA methylation at the whole genome level can provide insights into the regulatory mechanisms underlying abiotic stress response/adaptation. We report DNA methylation patterns and their influence on transcription in three rice (Oryza sativa) cultivars (IR64, stress-sensitive; Nagina 22, drought-tolerant; Pokkali, salinity-tolerant) via an integrated analysis of whole genome bisulphite sequencing and RNA sequencing. We discovered extensive DNA methylation at single-base resolution in rice cultivars, identified the sequence context and extent of methylation at each site. Overall, methylation levels were significantly different in the three rice cultivars. Numerous differentially methylated regions (DMRs) among different cultivars were identified and many of which were associated with differential expression of genes important for abiotic stress response. Transposon-associated DMRs were found coupled to the transcript abundance of nearby protein-coding gene(s). Small RNA (smRNA) abundance was found to be positively correlated with hypermethylated regions. These results provide insights into interplay among DNA methylation, gene expression and smRNA abundance, and suggest a role in abiotic stress adaptation in rice.