In many viral and nonviral eukaryotic systems, an inverse correlation has been observed between the extent of DNA methylation at 5'-C-C-G-G-3' sites and the extent of expression of specific genes as mRNA. The E2a region of adenovirus serotype 2 (Ad2) DNA encodes the Ad2-specific DNA binding protein required for viral DNA replication. In three lines of Ad2 transformed hamster cells (HE1, HE2, and HE3), multiple copies of the major part of the Ad2 genome persist in an integrated state. Cell lines HE2 and HE3 do not express the DNA-binding protein whereas line HE1 does so. It has been shown that, in cell line HE1, all 5'-C-C-G-G-3' (Hpa II/MspI) sites in the E2a region remain unmethylated. Conversely, in lines HE2 and HE3 lacking expression of the E2a region all Hpa II sites are methylated. The cloned E2a region of Ad2 DNA, the HindIII A fragment in pBR322, was methylated in vitro by using Hpa II DNA methyltransferase (5'-C-C*G-G-3') or was left unmethylated. In vitro methylation did not break or nick supercoiled circular DNA. Methylated or unmethylated DNA was then microinjected into the nuclei of Xenopus laevis oocytes, and the subsequent synthesis of Ad2-specific RNA was monitored. In vitro-methylated DNA remained in the methylated state for 24 hr on microinjection into nuclei of xenopus oocytes; unmethylated DNA remained unmethylated. When the injected DNA had been methylated by using Hpa H DNA methyltransferase, Ad2-specific RNA was not synthesized as late as 24 hr after microinjection. Unmethylated DNA was readily expressed into Ad2-specific RNA. As an internal control, unmethylated histone genes (h22 DNA) from sea urchin were microinjected together with methylated E2a DNA from Ad2. Ad2-specific RNA was not found; h22 DNA-specific RNA was readily detected. This finding ruled out nonspecific inhibitory effects in the methylated DNA preparation. Ir was also shown that transcription of the unmethylated HindIII A fragment of Ad2 DNA in Xenopus oocytes was initiated on the late promoter of the E2a region. The same promoter was used in productively infected KB cells. Methylation by BsuRI methylse (5'-G'G-C*C-3') did not inactivate the HindIII A fragment. These results provide evidence for the notion that methylated sequences at highly specific sites are involved in the regulation of gene expression. The actual nature of the regulatory signal is not yet understood.