Somaclonal variation arises in plants and animals when differentiated somatic cells are induced into a pluripotent state, but the resulting clones differ from each other and from their parents. In agriculture, somaclonal variation has hindered the micropropagation of elite hybrids and genetically modified crops, but the mechanism responsible remains unknown. The oil palm fruit 'mantled' abnormality is a somaclonal variant arising from tissue culture that drastically reduces yield, and has largely halted efforts to clone elite hybrids for oil production. Widely regarded as an epigenetic phenomenon, 'mantling' has defied explanation, but here we identify the MANTLED locus using epigenome-wide association studies of the African oil palm Elaeis guineensis. DNA hypomethylation of a LINE retrotransposon related to rice Karma, in the intron of the homeotic gene DEFICIENS, is common to all mantled clones and is associated with alternative splicing and premature termination. Dense methylation near the Karma splice site (termed the Good Karma epiallele) predicts normal fruit set, whereas hypomethylation (the Bad Karma epiallele) predicts homeotic transformation, parthenocarpy and marked loss of yield. Loss of Karma methylation and of small RNA in tissue culture contributes to the origin of mantled, while restoration in spontaneous revertants accounts for non-Mendelian inheritance. The ability to predict and cull mantling at the plantlet stage will facilitate the introduction of higher performing clones and optimize environmentally sensitive land resources.