Transcription from the HIV-1 long terminal repeat (LTR) was shown to be inhibited by DNA CpG methylation both in vivo and in vitro. Enzymatic methylation of CpG sites localized within the LTR decreased the transcription of the CAT reporter gene, chloramphenicol acetyltransferase, as assayed by the transient expression of this gene in tissue culture. The inhibitory effect could be initially overcome, in trans, by the transactivator tat. As a function of time, the presence of tat had no observable effect on transcription, within the limits of detection sensitivity, suggesting that the level of basal transcription was reduced to very low levels. This effect is suggestive of the involvement of cellular CpG methylation-dependent inhibitory factors which have been characterized by other laboratories. These data imply that transactivation is reduced to low levels after longer periods of time when the DNA template is sparsely methylated. The transcriptional inhibitory process may involve proteins such as MeCP which may interact with methylated DNA more slowly and/or weakly. Conversely, densely methylated DNA was transcriptionally repressed immediately which suggests the rapid/strong association of the cellular inhibitory factor(s). The transcriptional inhibitory effect was also observed in an in vitro transcription run-off system. These data suggest that the methylation-mediated inhibition of transcription is directly affected by CpG methylation density and may involve other factors.