We investigated the mechanism of retinoic acid receptor (RAR) beta2 gene silencing in breast cancer cells. Transfection experiments indicated that MCF-7 cells transactivate an exogenous beta2 promoter (-1470/+156) to the same extent as MTSV1.7 breast epithelial cells, which express endogenous RARbeta2. This was true even in the context of replicated chromatin, suggesting a cis-acting rather than a trans-acting defect. Cytosine methylation, a cis-acting DNA modification, has been implicated in RARbeta2 silencing in cancer cells. Upon bisulfite genomic sequencing, we found that 3 CpG sites in the beta2 RARE region were variably methylated in MCF-7 cells but were not methylated in MTSV1.7 cells or in 2 MDA-MB-231 subclones that differed in RARbeta2 expression (high in clone A2, low in clone A4). However, the 5'-UTR region was hypermethylated in clone A4 relative to clone A2 cells. Following 5-azacytidine treatment, RA and trichostatin A markedly induced RARbeta2 expression in MCF-7 cells but not in MDA-MB-231 clone A4 cells. A beta2 RARE reporter construct in which the methylation-susceptible cytosines in the sense strand were replaced by thymine displayed marked loss of activity in a replicated chromatin-dependent manner. We conclude that cytosine methylation contributes to RARbeta2 gene silencing in MCF-7 cells and that methylation of the RARE region may be particularly important. Oncogene (2000) 19, 4066 - 4070.