DNA methyltransferase 1 methylates hemi-methylated CG sites generated during DNA replication. Serine 515 of this enzyme has been shown to be phosphorylated. To explore the importance of S515 phosphorylation, we generated mutants of Dnmt1 which removed the phosphorylation potential (S515A) or mimic phosphoserine (S515E), purified the proteins from insect cells and analyzed their DNA methylation activity in vitro. The S515E mutant was found to be active, while S515A mutant had severe loss in activity when compared to the wild type protein. The loss of activity of the S515A variant was not due to loss of DNA binding capacity. Furthermore, we show that a phosphorylated peptide whose sequence mimics the surrounding of Ser515 (EKIYIS(P)KIVVE) inhibited the activity of wild type Dnmt1 ten-fold more than the non-phosphorylated peptide. The inhibition was specific for Dnmt1 and for the particular peptide sequence. Our data suggest that phosphorylation of Ser515 is important for an interaction between the N-terminal domain of Dnmt1 and its catalytic domain that is necessary for activity and that this interaction is specifically disrupted by the phosphorylated peptide. We conclude that phosphorylation of Dnmt1 at Ser515 could be an important regulator of Dnmt1 activity during cell cycle and after proliferative stimuli.