Human leukosialin (CD43) is expressed in a cell lineage-specific as well as a differentiation stage-specific fashion. The leukosialin promoter, made up of an Sp1 binding site and a sequence similar to that of an initiator, possesses high transcriptional potential. Previous data have demonstrated that the leukosialin gene is down-regulated in nonproducing cells by DNA methylation. In this paper the repressive mechanism of DNA methylation in expression systems is reported. In vitro DNA methylation with SssI (CpG) methylase of leukosialin-chloramphenicol acetyltransferase (CAT) constructs drastically reduced transcriptional activities in stable transfection systems with the human HeLa and Jurkat cell lines. On the other hand, the transcriptional repression by in vitro methylation was less pronounced in Drosophila melanogaster cells, which lack genomic methylation. In these cells, Sp1 could transactivate equally well both the unmethylated and methylated leukosialin promoter. In order to test whether one of the methyl-CpG-binding proteins, MeCP2, is responsible for transcriptional repression of the leukosialin gene, I isolated the human MeCP2 cDNA (encoding 486 amino acid residues) and expressed it in Drosophila cells. I found that MeCP2 substantially inhibited Sp1-activated transcription when the leukosialin promoter was methylated. The level of repression was directly proportional to the amount of MeCP2 expression vector transfected. Analysis of C-terminal deletion mutants of MeCP2 showed that repressive activity of Sp1 transactivation is localized to the N-terminal region consisting of amino acid residues 1 to 193, which encompass the methyl-binding domain. These results suggest that interference with Sp1 transactivation by MeCP2 is an important factor in the down-regulation of leukosialin gene expression by DNA methylation.