The indole alkaloid gramine occurs in leaves of certain barley (Hordeum vulgare L.) cultivars but not in others. A gene sequence in barley that earlier was characterized as a jasmonate-induced O-methyltransferase (MT) (EC 2.1.1.6, GenBank accession U54767) was here found to be absent in some barley cultivars and breeding lines that all lacked gramine. The cDNA was cloned and expressed in Escherichia coli and the recombinant protein purified. The purified recombinant protein methylated two substrates in the pathway to gramine: 3-aminomethylindole (AMI) and N-methyl-3-aminomethylindole (MAMI) at a high rate, with Km-values of 77 microM and 184 microM, respectively. In contrast, the protein did not exhibit any detectable methylation with the earlier suggested substrate for O-methylation, caffeic acid. A number of cultivars and breeding lines of barley were analyzed for presence of the U54767 gene sequence and MT protein and the enzyme activity in vitro with MAMI or caffeic acid as substrates. The results showed a clear relationship between the presence of the MT gene, the MT protein and N-methyltransferase activity, and confirmed the identification of the gene as coding for an N-methyltransferase (NMT, EC 2.1.1) and being involved in gramine biosynthesis.