Here we provide evidence that EBNA2 is methylated in vivo and that methylation of EBNA2 is a prerequisite for binding to SMN. We present SMN as a novel binding partner of EBNA2 by showing that EBNA2 colocalizes with SMN in nuclear gems and that both proteins can be coimmunoprecipitated from cellular extract. Furthermore, in vitro methylation of either wild-type EBNA2 or a glutathione S-transferase-EBNA2 fusion protein encompassing the arginine-glycine (RG) repeat element is necessary for in vitro binding to the Tudor domain of SMN. The recently shown functional cooperation of SMN and EBNA2 in transcriptional activation and the previous observation of a severely reduced transformation potential yet strongly enhanced transcriptional activity of an EBNA2 mutant lacking the RG repeat indicate that binding of SMN to EBNA2 is a critical step in B-cell transformation by Epstein-Barr virus.