We hypothesized that epigenetics is a link between smoking/allergen exposures and the development of Asthma and chronic obstructive pulmonary disease (ACO). A total of 75 of 228 COPD patients were identified as ACO, which was independently associated with increased exacerbations. Microarray analysis identified 404 differentially methylated loci (DML) in ACO patients, and 6575 DML in those with rapid lung function decline in a discovery cohort. In the validation cohort, ACO patients had hypermethylated PDE9A (+ 30,088)/ZNF323 (− 296), and hypomethylated SEPT8 (− 47) genes as compared with either pure COPD patients or healthy non-smokers. Hypermethylated TIGIT (− 173) gene and hypomethylated CYSLTR1 (+ 348)/CCDC88C (+ 125,722)/ADORA2B (+ 1339) were associated with severe airflow limitation, while hypomethylated IFRD1 (− 515) gene with frequent exacerbation in all the COPD patients. Hypermethylated ZNF323 (− 296) / MPV17L (+ 194) and hypomethylated PTPRN2 (+ 10,000) genes were associated with rapid lung function decline. In vitro cigarette smoke extract and ovalbumin concurrent exposure resulted in specific DNA methylation changes of the MPV17L / ZNF323 genes, while 5-aza-2′-deoxycytidine treatment reversed promoter hypermethylation-mediated MPV17L under-expression accompanied with reduced apoptosis and decreased generation of reactive oxygen species. Aberrant DNA methylations may constitute a determinant for ACO, and provide a biomarker of airflow limitation, exacerbation, and lung function decline.