Progesterone receptor (PR) is an estrogen-stimulated gene which has a CpG island that is heavily methylated in a significant fraction of estrogen receptor (ER)-negative/PR-negative human breast cancers and cell lines, including MDA-MB-231 cells. Treatment of MDA-MB-231 cells with the demethylating agent, 5-aza-2'-deoxycytidine (deoxyC) led to demethylation and expression of ER and PR. However, simultaneous treatment with antiestrogen prevented PR transcription, suggesting that demethylation of PR alone is not sufficient to reactivate the PR gene. To examine the effects of ER on the methylation status of the PR CpG island, we stably transfected MDA-MB-231 cells with an inducible expression vector for ER. Surprisingly, in two cell clones, we found that induction of PR gene expression by ligand-bound ER does not require demethylation of the PR CpG island. In contrast, induction of PR transcription was inhibited by blocking the interaction of ER with SRC-1A, a coactivator of ER function. For the first time, we show that a transcription factor with the potential to remodel heterochromatin can activate gene expression without altering the methylation status of the CpG island. These results raise the possibility that demethylation and histone acetylation are distinct but complementary mechanisms for destabilizing heterochromatin and activating transcription.