Sequence-specific methylation of the promoter and adjacent regions in mammalian genes transcribed by RNA polymerase II leads to the inhibition of these genes. So far, RNA polymerase III-transcribed genes have not been investigated in depth. We therefore studied methylation effects on the RNA polymerase III-transcribed VAI gene of adenovirus type 2 DNA. The VAI gene contains 20 5'-CG-3' dinucleotides, of which 4 (20%) can be methylated by HpaII (5'-CCGG-3') and HhaI (5'-GCGC-3'). Three of these 5'-CG-3' sequences are located close to the internal regulatory region of the VAI segment. An unmethylated, a 5'-CCGG-3'- and 5'-GCGC-3'-methylated, and a 5'-CG-3'-methylated pUC18 construct containing the VAI and VAII regions were transfected into mammalian cells. In many experiments, an inactivating effect of 5'-CCGG-3' and 5'-GCGC-3' DNA methylation on the VAI region was not observed. In contrast, methylation of all 20 5'-CG-3' sequences in the VAI region by a CpG-specific DNA methyltransferase from Spiroplasma species did interfere with VAI transcription. Transcription of the VAI- and VAII- and of the VAI-containing constructs was also shown to be inhibited in an in vitro cell-free transcription system after the constructs had been methylated at the 5'-CCGG-3' and 5'-GCGC-3' sequences or at all 5'-CG-3' sequences. When an oligodeoxyribonucleotide which carried the internal control block A of the VAI region was methylated at three 5'-CG-3' sequences, the formation of a complex with HeLa nuclear proteins was abrogated. The results presented support the notion that the VAI gene transcribed by the DNA-dependent RNA polymerase III is also inactivated by methylation of the decisive 5'-CG-3' sequences.