A novel system to study the methylation of newly synthesized DNA in isolated nuclei was developed. Approximately 2.5% of cytosine residues incorporated into nascent DNA became methylated by endogenous methylase(s), and the level of DNA modification was reduced by methylation inhibitors. DNA synthesis and methylation were dependent on separate cytosol factors. The cytosol factor or factors required for DNA methylation were sensitive to trypsin digestion and were precipitable by (NH4)2SO4, suggesting that they were proteinaceous. Time-course experiments revealed a short lag of approximately 20 s between synthesis and methylation in nuclei. The DNAs produced in these nuclei were a mixed population of low molecular weight fragments and higher molecular weight fragments shown to be short extension of existing replicons. The methylation level found in low molecular weight DNA was lower than that found in bulk L1210 DNA, indicating that further methylation events might take place after ligation of small fragments. These data suggest that newly synthesized DNA is a good substrate for methylase enzymes and that nuclear cytoplasmic interactions may be important in controlling inheritance of methylation patterns.