SMCHD1 is a non-canonical SMC protein known to modulate chromatin structure and DNA methylation. Mutations in SMCHD1 cause Facioscapulohumeral Muscular Dystrophy (FSHD), a progressive muscular dystrophy. FSHD can also be caused by mutations in DNA Methyltransferase 3 Beta (DNMT3B), and by contractions of the D4Z4 macrosatellite array, associated with loss of methylation at this site. A previous unbiased screen for chromatin regulators that modulate alternative splicing uncovered SMCHD1 as a leading candidate. Here, we analyzed RNA-seq data of patients and mice with mutations in SMCHD1 and uncovered alternative splicing of several hundred genes in each case. Moreover, we demonstrated that SMCHD1 binds alternatively excluded exons, with a slower RNA Pol2 elongation rate. Interestingly, many alternatively spliced genes are known to be related to the disease phenotype, including DNMT3B that has functionally distinct alternatively spliced isoforms. Taken together, this suggests a new model for FSHD pathogenesis by SMCHD1 mutations: SMCHD1 binding change local chromosome topology and alter RNA Pol2 elongation rate, to allow recruitment of inhibitory splicing factors to regulate splicing. Mutations in SMCHD1 therefore lead to mis-splicing of multiple genes including DNMT3B. DNMT3B mis-splicing cause aberrant DNA methylation, including at D4Z4, leading to FSHD2 development.