To investigate the relationship between the local configuration of a g
ene and its level of expression, we constructed a rat cell line, Hy5,
carrying a mutant polyomavirus middle T oncogene (pmt) whose overexpre
ssion converted the cells to the transformed state. The structure of t
he transgene was such that pmt was able to undergo chromosomal inversi
on at a relatively high rate by a cross-over in flanking pBR322 sequen
ces. Hy5 cells became spontaneously transformed at a rate of 10(-5) pe
r cell generation and all of the transformants analysed had sustained
pmt inversion. CpG sequences were partially methylated in the Hy5 inse
rt but appeared demethylated in transformants. In two subclones derive
d from untransformed Hy5 cells, the pmt insert was densely methylated,
transcriptionally inactive and unable to undergo homologous recombina
tion. Our results suggest that DNA repair associated with recombinatio
nal events leads to a heritable hypomethylation of the locus which is
responsible for its activation.