Abnormal regional increases in DNA methylation, which have potential for causing gene inactivation and chromosomal instability, are consistently found in immortalized and tumorigenic cells. Increased DNA methyltransferase activity, which is also a characteristic of such cells, is a candidate to mediate these abnormal DNA methylation patterns. We now show that, in NIH 3T3 mouse fibroblasts, constitutive overexpression of an exogenous mouse DNA methyltransferase gene results in a marked increase in overall DNA methylation which is accompanied by tumorigenic transformation. These transformation changes can also be elicited by dexamethasone-inducible expression of an exogenous DNA methyltransferase gene. Our findings provide strong evidence that the increase in DNA methyltransferase activity associated with tumor progression could be a key step in carcinogenesis and provide a model system that can be used to further study this possibility.