Activator protein-2 alpha (AP-2 alpha) is a cell type-specific, developmentally regulated, transcription factor that has been implicated as a critical regulator of gene expression during vertebrate development and carcinogenesis. We found that AP-2 alpha was differentially expressed in the normal human lung fibroblast cell strains WI38, MRC-5 and their respective SV40-transformed cell counterparts WI38-VA, MRC-5VA. Since CpG methylation within genetic regulatory regions has been implicated as a mechanism of gene regulation, we investigated the CpG methylation status of the AP-2 alpha gene promoter in these cells. High resolution mapping of methylated cytosines revealed that differential expression of the AP-2 alpha gene in normal human lung fibroblasts and their SV40-transformed counterparts was associated with distinct patterns of cytosine methylation in the AP-2 alpha promoter just 5' to the transcription initiation site. Site-specific methylation was positively correlated with increased AP-2 alpha gene expression in both transformed cell lines investigated. Interestingly, one of the two major centers of hypermethylation in the transformed cells encompassed the cis-element for the AP-2 repressing transcription factor AP-2rep (KLF12). Finally, a sequence variation in human lung fibroblasts relative to the published sequence revealed a previously unidentified AP-2 binding site at position -528 with respect to the transcription initiation site that overlapped the AP-2rep site. Our results suggest that transcriptional activation of AP-2 alpha in the SV40-transformed cells is mediated, at least in part, by site-specific methylation of a negative regulatory cis-element in the AP-2 alpha promoter.