The biological activities of the papillomavirus E2 protein in transcription, replication, and maintenance of the papillomavirus genome rely on the E2 protein's ability to bind that genome specifically. The E2 binding sites (E2BSs), located within the long control region (LCR) of human papillomavirus (HPV) genomes, contain potential sites for 5'methylation at cytosine (CpG) residues. The E2 protein's capacity to bind E2BS in vitro is inhibited by methylation of these cytosines (59). Herein, we describe experiments to assess the influence of methylation on E2 function in cells. E2's ability to activate transcription was inhibited by the global methylation of CpG dinucleotides in E2-responsive transcriptional templates or when only the CpG dinucleotides within the E2BSs of a transcriptional template were methylated. Thus at least one biological activity of E2 that is dependent on its ability to bind DNA in a site-specific manner is influenced by the methylation status of its cognate binding site. The activity of DNA methylases is influenced by the differentiation status of mammalian cells. The life cycle of HPVs is tied to the differentiation of its host cells within stratified squamous epithelia. To investigate whether methylation of the papillomavirus genomes is influenced by the differentiation status of host epithelial cells, we analyzed HPV16 DNA harvested from a cervical epithelial cell line that was isolated from an HPV16-infected patient. We found, using bisulfite treatment to discriminate between methylated and unmethylated cytosines, that the HPV16 LCR was selectively hypomethylated in highly differentiated cell populations. In contrast, the HPV16 LCR from poorly differentiated, basal cell-like cells contained multiple methylated cytosines and were often methylated at E2BSs, particularly E2BS(2). These experiments indicate that the methylation state of the viral genome, and particular that of E2BSs, may vary during the viral life cycle, providing a novel means for modulating E2 function. These studies also uncovered an extensive pattern of methylation at non-CpG dinucleotides indicative of de novo methylation. The potential implications of this de novo methylation pattern are discussed.