Mammalian DNA (cytosine-5) methyltransferase contains a C-terminal domain that is closely related to bacterial cytosine-5 restriction methyltransferase. This methyltransferase domain is linked to a large N-terminal domain. It is shown here that the N-terminal domain contains a Zn binding site and that the N- and C-terminal domains can be separated by cleavage with trypsin or Staphylococcus aureus protease V8; the protease V8 cleavage site was determined by Edman degradation to lie 10 residues C-terminal of the run of alternating lysyl and glycyl residues which joins the two domains and six residues N-terminal of the first sequence motif conserved between the mammalian and bacterial cytosine methyltransferases. While the intact enzyme had little activity on unmethylated DNA substrates, cleavage between the domains caused a large stimulation of the initial velocity of methylation of unmethylated DNA without substantial change in the rate of methylation of hemimethylated DNA. These findings indicate that the N-terminal domain of DNA methyltransferase ensures the clonal propagation of methylation patterns through inhibition of the de novo activity of the C-terminal domain. Mammalian DNA methyltransferase is likely to have arisen via fusion of a prokaryotic-like restriction methyltransferase and an unrelated DNA binding protein. Stimulation of the de novo activity of DNA methyltransferase by proteolytic cleavage in vivo may contribute to the process of ectopic methylation observed in the DNA of aging animals, tumors and in lines of cultured cells.