Bacteriophage T4 Alc protein participates in shutting off host transcription after infection of E. coli. It is demonstrated that Alc acts as a site-specific termination factor. The Alc sites occur frequently in E. coli DNA, resulting in early cessation of elongation in several tested transcription units. Alc-dependent termination requires unimpeded propagation of the elongating complex as it approaches the Alc site. Temporary halting of RNA polymerase within 10-15 bp before the Alc site prevents termination. Bacteriophage T4 transcription is protected from the action of Alc by overall substitution of cytosine with 5-hydroxymethyl cytosine in T4 DNA. In vitro methylation of CpG sequences in the vicinity of an Alc site abolishes the effect of Alc. Thus, Alc-dependent termination involves local sensing of the state of cytosine modification and a short-term "memory" of recent pausing.