The W7 mouse thymoma cell line does not express the metallothionein-I (MT-I) gene in the presence of either cadmium or glucocorticoids, unlike most other cell lines. This cell line was therefore used as a model system for studying the role of DNA methylation on MT-I gene expression. The extent of DNA methylation within the MT-I gene and its flanking regions was determined by comparing the cleavage patterns generated by the isoschizomeric restriction enzymes Hpa II and Msp I. In W7 cells, all of the Hpa II sites in the vicinity of the MT-I gene are methylated, whereas in cells that have an expressible MT-I gene (for example, Friend erythroleukemia cells) all of these Hpa II sites are unmethylated. When W7 cells are treated for a few hours with 5-azacytidine, the MT-I gene becomes inducible by both cadmium and glucocorticoids. Addition of hydroxyurea along with 5-azacytidine prevents MT-I gene induction, suggesting that incorporation of 5-azacytidine into DNA is required before this gene can be activated. To determine whether 5-azacytidine treatment changes the methylation pattern near the MT-I gene, we treated W7 cells with 5-azacytidine and selected inducible cells in 10 micro M cadmium. all of the Hpa II sites within the MT-I gene are unmethylated in these cadmium-resistant W7 cells. In addition, flanking DNA sequences are also undermethylated in a pattern similar to that seen in Friend erythroleukemia cells that express the MT-I gene. The possible significance of methylation as a mechanism of gene commitment during cell differentiation is discussed.