Mammals have long been known to tag their DNA by the addition of methyl groups to cytosine residues. Only quite recently, however, has the functional significance of DNA methylation established a firm footing. Evidence now indicates that DNA methylation is essential for development, and is involved in both programmed and ectopic gene inactivation. Recent structural and mechanistic work on bacterial cytosine-5-methyltransferases has provided much insight into the function of the carboxy-terminal catalytic domain of eukaryotic cytosine-5-methyltransferases; evidence is emerging that the amino-terminal domain targets the enzyme to the replication machinery and may be involved in sensing the pre-existing methylation state of the DNA.