Loss of DNA mismatch repair has been found in tumors associated with the familial cancer predisposition syndrome HNPCC (hereditary non-polyposis colorectal cancer) and a subset of sporadic cancers. MSH2 deficiency abolishes the action of the mismatch repair system, resulting in a phenotype which is characterized by an increased accumulation of base substitutions and frameshifts, enhanced recombination between homologous but non-identical DNA sequences, and tolerance to the cytotoxic effects of methylating agents. In this study we describe an embryonic stem cell line in which the level of MSH2 protein is 10-fold reduced compared to that in wild-type cells. Remarkably, these MSH2-low cells were as resistant to killing by methylating agents as cells completely lacking MSH2, while they had retained almost maximal mismatch repair capacity as judged from their anti-mutagenic and anti-recombinogenic capacity and the absence of microsatellite instability. In contrast, MSH2-low cells were highly sensitive to methylation-damage induced mutagenesis. Thus, 10-fold reduced MSH2 protein levels render cells resistant to the toxic and highly sensitive to the mutagenic effects of methylating agents. This condition is not manifested by microsatellite instability and may have implications for both the etiology and treatment of cancer.