Repression of transcription from densely methylated genes can be mediated by the methyl-CpG binding protein MeCP-1 (Boyes and Bird, 1991). Here we have investigated the effect of methylation on genes with a low density of methyl-CpG. We found that sparse methylation could repress transfected genes completely, but the inhibition was fully overcome by the presence in cis of an SV40 enhancer. Densely methylated genes, however, could not be reactivated by the enhancer. In vitro studies showed that the sparsely methylated genes bound weakly to MeCP-1 and that binding interfered with transcription. In the absence of available MeCP-1, methylation had minimal effects on transcription. From these and other results we propose that sparsely methylated genes form an unstable complex with MeCP-1 which prevents transcription when the promoter is weak. This complex can be disrupted by a strong promoter, thereby allowing the methylated gene to be transcribed.