Transcription of the DNA modification gene (mom) of bacteriophage Mu requires methylation of three GATC sites upstream of the mom promoter by the Escherichia coli deoxyadenosine methylation function (Dam). The three sites map within a 40-bp segment termed region I. Small deletions, inversions, duplications and specific point mutations have been introduced in region I. Their effect on mom expression has been studied in dam+ and dam strains. Dam-dependent expression of the mom gene requires a specific arrangement of the three GATC sites and the presence of the methylated base in at least two of the three sites. We show that mom specific modification is regulated by a host protein. The Mom function is expressed in dam strains if they are defective in one component of the methylation-instructed mismatch correction system, mutH. We suggest that the product of mutH functions as a transcriptional repressor by binding to region I.