Alterations in gene expression accompany cell-type-specific differentiation. In complex systems where functional differentiation depends on the organization of specific cell types into highly specialized structures (tissue morphogenesis), it is not known how epigenetic mechanisms that control gene expression influence this stepwise differentiation process. We have investigated the effect of DNA methylation, a major epigenetic pathway of gene silencing, on the regulation of mammary acinar differentiation. Our in vitro model of differentiation encompasses human mammary epithelial cells that form polarized and hollow tissue structures (acini) when cultured in the presence of basement membrane components. We found that acinar morphogenesis was accompanied with chromatin remodeling, as shown by alterations in histone 4 acetylation, heterochromatin 1 protein, and histone 3 methylated on lysine 9, and with an increase in expression of MeCP2, a mediator of DNA-methylation-induced gene silencing. DNA hypomethylation induced by treatment with 5-aza-2' deoxycytidine during acinar differentiation essentially prevented the formation of apical tissue polarity. This treatment also induced the expression of CK19, a marker of cells that are in a transitional differentiation stage. These results suggest that DNA methylation is a mechanism by which mammary epithelial differentiation is coordinated both at the tissue and cellular levels.