Silencing of chromosomal domains has been described in diverse systems such as position effect variegation in insects, silencing near yeast telomeres, and mammalian X chromosome inactivation. In mammals, silencing is associated with methylation at CpG dinucleotides, but little is known about how methylation patterns are established or altered during development. We previously described a strain-specific modifier locus, Ssm1, that controls the methylation of a complex transgene. In this study we address the questions of the nature of Ssm1's targets and whether its effect extends into adjacent sequences. By examining the inheritance of methylation patterns in a series of mice harboring deletion derivatives of the original transgene, we have identified a discrete segment, derived from the gpt gene of Escherichia coli, that is a major determinant for Ssm1-mediated methylation. Methylation analysis of sequences adjacent to a transgenic target indicates that the influence of this modifier extends into the surrounding chromosome in a strain-dependent fashion. Implications for the mechanism of Ssm1 action are discussed.