The DNA methylation status of HRD, a murine transgene, can be controlled by the genetic background upon which it is carried. We found the transgene to be transcribed in competent tissues only when undermethylated. Chromatin structure over the transgene was assayed by nuclear accessibility with DNase I, MspI, and PstI. While the transgene was up to fivefold more resistant to MspI when methylated than when not methylated, we observed no such difference with DNase I or PstI. We suggest that methyl-CpG-binding proteins are responsible for the difference observed with MspI, but that the chromatin structures are otherwise similarly compacted. Methylation could, therefore, play a regulatory role in gene expression beyond that which can be accomplished by bulk chromatin structure alone.Cytosine methylation occurs over approximately 60% of the CpG dinucleotides in the vertebrate genome (4) and has long been associated with a repression of gene activity (9). The pattern of methylation across the genome is passed to subsequent cell generations by the maintenance methylation activity of the methyltransferase enzyme (5, 18). The importance of DNA methylation in the mammalian genome has been demonstrated by the inability of mice homozygous for a targeted disruption of the methyltransferase gene to complete development (26).The mechanism by which DNA methylation effects gene repression remains unclear. Several lines of evidence suggest that methylation may interfere with gene expression directly. The cytosine analog 5-azacytidine is capable of reactivating silent genes, presumably by demethylating CpGs which reside in regulatory regions (22). Also, certain transcriptional activator proteins whose cognate sequences contain CpGs have been demonstrated to bind only when the CpG is not methylated (31, 41). These cases of methylation-sensitive binding were determined in vitro, however; genomic footprinting of the tyrosine aminotransferase promoter demonstrated that binding of the CREB transcription factor could not be induced by demethylation of its binding site, even though it exhibited methylation-sensitive binding when assayed in vitro (42). Furthermore, some transcription factors bind their targets equally well in vitro, whether methylated or not (19).Other lines of evidence suggest that the repressive effect of methylation is indirect and mediated by chromatin structure. Although in vitro methylation of DNA constructs prior to transient transfection renders them transcriptionally inert, the onset of repression after transfection is delayed and correlates with the formation of chromatin over the methylated DNA (7). Similarly, V(D)J recombination of extrachromosomal substrates is inhibited by in vitro CpG methylation, but only after replication (20). As the acquisition of resistance to exogenous endonucleases also occurs after replication, the inhibition of V(D)J recombination is presumably the result of the formation of chromatin over the extrachromosomal substrate rather than the presence of the methyl moieties. Other work has...