Cytosine residues in the sequence 5'CpG (cytosine-guanine) are often postsynthetically methylated in animal genomes. CpG methylation is involved in long-term silencing of certain genes during mammalian development and in repression of viral genomes. The methyl-CpG-binding proteins MeCP1 and MeCP2 interact specifically with methylated DNA and mediate transcriptional repression. Here we study the mechanism of repression by MeCP2, an abundant nuclear protein that is essential for mouse embryogenesis. MeCP2 binds tightly to chromosomes in a methylation-dependent manner. It contains a transcriptional-repression domain (TRD) that can function at a distance in vitro and in vivo. We show that a region of MeCP2 that localizes with the TRD associates with a corepressor complex containing the transcriptional repressor mSin3A and histone deacetylases. Transcriptional repression in vivo is relieved by the deacetylase inhibitor trichostatin A, indicating that deacetylation of histones (and/or of other proteins) is an essential component of this repression mechanism. The data suggest that two global mechanisms of gene regulation, DNA methylation and histone deacetylation, can be linked by MeCP2.