We methylated specific cytosine residues within or immediately around the CTF and Sp1 binding sites of the Herpes simplex virus thymidine kinase promoter. The efficiency of transcription in vivo was reduced at least 50-fold compared with transcription from the unmethylated promoter. However, methylation within the CTF recognition site had no effect on the affinity of CTF for this site in vitro. Methylation of the Sp1 site resulted in only a small decrease in the affinity of this factor for its recognition site. In vivo studies showed that the same gene inserted in different vector DNAs was regulated differently by methylation in the promoter. These results show that cytosine methylation can inhibit transcription by a mechanism other than directly blocking the binding of transcription factors.