Sunlight-induced C-->T mutation hotspots occur most frequently at methylated CpG sites in tumor suppressor genes and are thought to arise from translesion synthesis past deaminated cyclobutane pyrimidine dimers (CPDs). While it is known that methylation enhances CPD formation in sunlight, little is known about the effect of methylation and sequence context on the deamination of 5-methylcytosine ((m)C) and its contribution to mutagenesis at these hotspots. Using an enzymatic method, we have determined the yields and deamination rates of C and (m)C in CPDs and find that the frequency of UVB-induced CPDs correlates with the oxidation potential of the flanking bases. We also found that the deamination of T(m)C and (m)CT CPDs is about 25-fold faster when flanked by G's than by A's, C's or T's in duplex DNA and appears to involve catalysis by the O6 group of guanine. In contrast, the first deamination of either C or (m)C in AC(m)CG with a flanking G was much slower (t(1/2) >250 h) and rate limiting, while the second deamination was much faster. The observation that C(m)CG dimers deaminate very slowly but at the same time correlate with C-->T mutation hotspots suggests that their repair must be slow enough to allow sufficient time for deamination. There are, however, a greater number of single C-->T mutations than CC-->TT mutations at C(m)CG sites even though the second deamination is very fast, which could reflect faster repair of doubly deaminated dimers.