The mechanism of inactivation of the O6-methylguanine-DNA methyltransferase (MGMT), responsible for repair of mutagenic and cytotoxic O6-alkylguanine, in Mex- tumor cells, is not completely understood. We have examined the role of CpG methylation in the human MGMT promoter in a luciferase (luc) reporter plasmid and associated alteration in chromatin structure. Methylation of 16% CpG sequences in promoter and flanking sequences in the plasmid with HpaII methylase reduced luciferase activity by 10-12-fold, while methylation of all CpG sites, including those in the luc coding sequence, as well as the promoter sequence blocked expression completely. Repression of luc expression due to partial but not complete CpG methylation could be reversed by histone deacetylase inhibitor trichostatin A (TSA). However, 5-azacytidine, which reverses CpG methylation, but not TSA, could reactivate silent MGMT gene in Mex- HeLa MR cells. Furthermore, chromatin immunoprecipitation (ChIP) assay showed reduced level of acetylation of H4 histone bound to the methylated promoter compared with the non-methylated promoter. These results suggest that complete repression of the MGMT gene in Mex- cells requires methylation of CpG sequences in both promoter and neighboring regions of the gene, resulting in inactive, condensed chromatin state of the gene.