RNA-directed DNA methylation, which is one of several RNAi-mediated pathways in the nucleus, has been highly elaborated in the plant kingdom. RNA-directed DNA methylation requires for the most part conventional DNA methyltransferases, histone modifying enzymes and RNAi proteins; however, several novel, plant-specific proteins that are essential for this process have been identified recently. DRD1 (defective in RNA-directed DNA methylation) is a putative SWI2/SNF2-like chromatin remodelling protein; DRD2 and DRD3 (renamed NRPD2a and NRPD1b, respectively) are subunits of Pol IVb, a putative RNA polymerase found only in plants. Interestingly, DRD1 and Pol IVb appear to be required not only for RNA-directed de novo methylation, but also for full erasure of methylation when the RNA trigger is withdrawn. These proteins thus have the potential to facilitate dynamic regulation of DNA methylation. Prominent targets of RNA-directed DNA methylation in the Arabidopsis thaliana genome include retrotransposon long terminal repeats (LTRs), which have bidirectional promoter/enhancer activities, and other types of intergenic transposons and repeats. Intergenic solitary LTRs that are targeted for reversible methylation by the DRD1/Pol IVb pathway can potentially act as switches or rheostats for neighboring plant genes. The resulting alterations in gene expression patterns may promote physiological flexibility and adaptation to the environment.