Sequence analysis of the BcnI restriction-modification system from Bacillus centrosporus revealed four open reading frames (bcnIC, bcnIR, bcnIB and bcnIA) that are arranged as two converging collinear pairs. One pair encodes a putative small regulatory protein, C.BcnI, and the restriction endonuclease R.BcnI. The other two gene products are the DNA cytosine-N4 methyltransferases M.BcnIA and M.BcnIB, which differ by circular permutation of conserved sequence motifs. The BcnI methyltransferases are isospecific on double-stranded DNA [methylation specificity CC(C/G)GG], but M.BcnIA can also methylate the target sites in single-stranded DNA. Functional analysis shows that bcnIA is dispensable (bcnIB is capable of protecting the DNA against the in vivo activity of bcnIR); in contrast, no stable clones were obtained if bcnIB alone was deleted from the system. By analogy with the DpnII system, the second methylase M.BcnIA may play a role in the transformation proficiency of its gram-positive host. The interchangeability of homologous elements in the beta class of cytosine-N4 methylases was probed by hybrid formation between M.BcnIB and its closest homolog M.Cfr9I (CCCGGG) employing a novel semi-random strategy combined with selection for catalytic activity. The fusion points in the active hybrids mapped in a narrow region located between sequence motifs X and I. Our data illustrate that recombination of two related sequences by circular permutation may serve as an evolutionary mechanism for creating new specificities of amino MTases.