DNA deaminases of the Aid/Apobec family convert cytosine into uracil and play key roles in acquired and innate immunity. The epigenetic modification by methylation of cytosine in CpG dinucleotides is also mutagenic, but this is thought to occur by spontaneous deamination. Here we show that Aid and Apobec1 are 5-methylcytosine deaminases resulting in a thymine base opposite a guanine. Their action can thus lead to C --> T transition mutations in methylated DNA, or in conjunction with repair of the T:G mismatch, to demethylation. The Aid and Apobec1 genes are located in a cluster of pluripotency genes including Nanog and Stella and are co-expressed with these genes in oocytes, embryonic germ cells, and embryonic stem cells. These results suggest that Aid and perhaps some of its family members may have roles in epigenetic reprogramming and cell plasticity. Transition in CpG dinucleotides is the most frequent mutation in human genetic diseases, and sequence context analysis of CpG transitions in the APC tumor suppressor gene suggests that DNA deaminases may play a significant role in tumor etiology.