It has recently been shown that in Xenopus, DNA demethylation at promoter regions may involve protein-DNA interactions, based on the specificity of the demethylated sites. Utilizing a stable episomal system in human cells, we recently mapped the sites and dissected the steps of demethylation at oriP sites bound by EBNA1 protein. Although it is clear that protein binding is required for demethylation of the oriP sites, it is uncertain whether this is a unique feature of the replication origin or whether it is a general phenomenon for all DNA sequences to which sequence-specific proteins are bound. In the present study, we utilize the well-defined Escherichia coli lac repressor/operator system in human cells to determine whether protein binding to methylated DNA, in a region that is neither a replication origin nor a promoter, can also lead to demethylation of the binding sites. We found that demethylation specified by protein binding is not unique to the replication origin or to the promoter. We also found that transcriptional activity does not influence demethylation of the lac operator. Isopropyl--D-thiogalactopyranoside (IPTG), an inhibitor of the lac repressor, can prevent demethylation of the lac operator DNA sites and can modulate demethylation of the lac operator by affecting the binding affinity of the lac repressor. Using this system, a titration of protein binding can be done. This titration permits one to infer that protein binding site occupancy is the determinant of demethylation at DNA sites and permits a determination of how this process progresses over time.CpG methylation is tightly regulated during DNA replication and differentiation of somatic cells. The preexisting DNA methylation pattern is maintained by DNA methyltransferase 1 (DNMT1) during DNA replication (14). Changes in the basic methylation pattern occur throughout development through the dynamic processes of de novo methylation and demethylation. Two gene products, DNMT3A and DNMT3B, have been recently reported to have methyltransferase activity both in vitro and in vivo (11, 17). These de novo methyltransferases are believed to be involved in gene regulation, X-inactivation, genomic imprinting, and methylation of endogenous retroviruses and transposable elements (for a review, see reference 27). Several demethylases have been described previously (2,13,21,24). Unfortunately, the activities of some of these reported demethylases cannot be reproduced in other laboratories (16,22), and in one case they cannot be reproduced in the laboratory reporting the activity (20). It has been found that genes lose their CpG methylation within the promoter when they become activated, whereas genes acquire CpG methylation after they are no longer transcribed (for reviews, see references 4 and 18). Matsuo et al. (15) suggested that demethylation may involve protein-DNA interactions in Xenopus embryos, based on the specificity of the demethylated sites. We have further demonstrated in an episomal system that binding of proteins specifies sites of demet...