DNA methylation is involved in gene silencing and genomic stability in mammals, plants, and fungi. Genetics studies of Neurospora crassa have revealed that a DNA methyltransferase (DIM-2), a histone H3K9 methyltransferase (DIM-5), and heterochromatin protein 1 (HP1) are required for DNA methylation. We explored the interrelationships of these components of the methylation machinery. A yeast two-hybrid screen revealed that HP1 interacts with DIM-2. We confirmed the interaction in vivo and demonstrated that it involves a pair of PXVXL-related motifs in the N-terminal region of DIM-2 and the chromo shadow domain of HP1. Both regions are essential for proper DNA methylation. We also determined that DIM-2 and HP1 form a stable complex independently of the trimethylation of histone H3K9, although the association of DIM-2 with its substrate sequences depends on trimethyl-H3K9. The DIM-2/HP1 complex does not include DIM-5. We conclude that DNA methylation in Neurospora is largely or exclusively the result of a unidirectional pathway in which DIM-5 methylates histone H3K9 and then the DIM-2/HP1 complex recognizes the resulting trimethyl-H3K9 mark via the chromo domain of HP1.In most eukaryotic organisms, genomic DNA is modified by the enzymatic conversion of certain cytosines to 5-methylcytosines. DNA methylation directly and indirectly influences gene expression and plays crucial roles in fundamental biological processes, such as X chromosome inactivation, genomic imprinting, and silencing of selfish DNA (5,17,21,25,29,44). DNA methylation is also thought to play key roles in tumorigenesis; inappropriate methylation can silence tumor-suppressor genes and/or activate oncogenes (14). Aberrant DNA methylation is associated with other diseases, most notably immunodeficiency, centromere instability, and facial anomalies syndrome in humans (2). Although information on the relationship between DNA methylation and human diseases is accumulating, basic questions, such as how DNA methylation is controlled and how it functions, remain unanswered.The results of research on DNA methylation using the filamentous fungus Neurospora crassa revealed that DNA methylation is controlled by the state of underlying chromatin proteins (17). In eukaryotic cells, DNA is wrapped around a protein octamer composed of histones (H2A, H2B, H3, and H4), which are subject to a variety of posttranslational modifications, including methylation, acetylation, phosphorylation, and ubiquitylation (3). The results of genetic studies in Neurospora demonstrated that condensed chromatin ("heterochromatin") associated with methylated lysine 9 of histone H3 (H3K9) is involved in DNA methylation. Mutations in either dim-5 or hpo, which, respectively, encode the DIM-5/KMT1 histone methyltransferase (HMTase) and heterochromatin protein 1 (HP1), eliminate all detectable DNA methylation, just like null mutations in the DNA methyltransferase (DMTase) gene dim-2 (16, 30, 51). The DIM-5 HMTase specifically trimethylates H3K9, and trimethyl-H3K9 (H3K9me3) is preferentially ...