A family of mammalian methyl-CpG binding proteins has been identified and characterized. MeCP2 and MBD1 are known proteins that bind to methylated DNA and can repress transcription. Three novel human and mouse proteins, MBD2, MBD3, and MBD4, were identified, all containing a methyl-CpG binding domain. MBD2 and MBD4 specifically bind to methylated DNA in vitro and colocalize with methylated satellite DNA in vivo. MBD3 does not bind methylated DNA in vivo or in vitro. These proteins are expressed in somatic tissues, but their expression is reduced or absent in embryonic stem cells, which are deficient in MeCP1 activity. The data suggest that MBD2 and MBD4 bind specifically to methyl-CpG in vitro and in vivo and are likely to be mediators of the biological consequences of the methylation signal. DNA methylation is the major modification of eukaryote genomes. In vertebrates, this occurs predominantly at position 5 of cytosines when followed by guanosine (CpG). DNA methylation can repress transcription and has been implicated in stable alterations of gene expression in development. DNA methylation is known to play an essential role in mammalian development because mice lacking a functional gene encoding the maintenance DNA methyltransferase (DNMT) are developmentally retarded and die at midgestation. In contrast to the situation in somatic cells, undifferentiated embryonic stem (ES) cells lacking a functional DNMT gene apparently grow normally despite containing approximately 5% of the wild-type DNA methylation level. One mechanism by which DNA methylation can cause transcriptional repression is by directly interfering with the binding of sequence-specific transcription factors to DNA. Some transcription factors have been shown to be unable to bind to their target sequences when methylated. The observations that DNA methylation is capable of repressing transcription at some distance and that repression of transgenes only occurs after chromatin assembly are inconsistent with the direct mechanism and indicate that a more indirect mechanism also exists. Two proteins have been identified, MeCP1 and MeCP2, which bind specifically to methylated DNA in any sequence context. Both are capable of inhibiting transcription. It is likely that MeCP1 and MeCP2 are important in interpreting the signal that methylation of DNA represents. MeCP2 consists of a single polypeptide that contains both a methyl-CpG binding domain (MBD) and transcriptional repression domain (TRD). MeCP2 is capable of binding to a single symmetrically methylated CpG pair and was found to bind to chromosomes at sites known to contain methylated DNA. On mouse chromosomes, this is visualized as prominent binding to the highly methylated major satellite located just proximal to centromeres, whereas on human or rat chromosomes which do not contain highly methylated satellite DNAs, general chromosomal binding is observed.A family of mammalian methyl-CpG binding proteins has been identified and characterized. MeCP2 and MBD1 are known proteins that bind to methylated DNA and can repress transcription. Three novel human and mouse proteins, MBD2, MBD3, and MBD4, were identified, all containing a methyl-CpG binding domain. MBD2 and MBD4 specifically bind to methylated DNA in vitro and colocalize with methylated satellite DNA in vivo. MBD3 does not bind methylated DNA in vivo or in vitro. These proteins are expressed in somatic tissues, but their expression is reduced or absent in embryonic stem cells, which are deficient in MeCP1 activity. The data suggest that MBD2 and MBD4 bind specifically to methyl-CpG in vitro and in vivo and are likely to be mediators of the biological consequences of the methylation signal. DNA methylation is the major modification of eukaryote genomes. In vertebrates, this occurs predominantly at position 5 of cytosines when followed by guanosine (CpG). DNA methylation can repress transcription and has been implicated in stable alterations of gene expression in development. DNA methylation is known to play an essential role in mammalian development because mice lacking a functional gene encoding the maintenance DNA methyltransferase (DNMT) are developmentally retarded and die at midgestation. In contrast to the situation in somatic cells, undifferentiated embryonic stem (ES) cells lacking a functional DNMT gene apparently grow normally despite containing approximately 5% of the wild-type DNA methylation level. One mechanism by which DNA methylation can cause transcriptional repression is by directly interfering with the binding of sequence-specific transcription factors to DNA. Some transcription factors have been shown to be unable to bind to their target sequences when methylated. The observations that DNA methylation is capable of repressing transcription at some distance and that repression of transgenes only occurs after chromatin assembly are inconsistent with the direct mechanism and indicate that a more indirect mechanism also exists. Two proteins have been identified, MeCP1 and MeCP2, which bind specifically to methylated DNA in any sequence context. Both are capable of inhibiting transcription. It is likely that MeCP1 and MeCP2 are important in interpreting the signal that methylation of DNA represents. MeCP2 consists of a single polypeptide that contains both a methyl-CpG binding domain (MBD) and transcriptional repression domain (TRD). MeCP2 is capable of binding to a single symmetrically methylated CpG pair and was found to bind to chromosomes at sites known to contain methylated DNA. On mouse chromosomes, this is visualized as prominent binding to the highly methylated major satellite located just proximal to centromeres, whereas on human or rat chromosomes which do not contain highly methylated satellite DNAs, general chromosomal binding is observed.