Genome-wide demethylation has been suggested to be a step in carcinogenesis. Evidence for this notion comes from the frequently observed global DNA hypomethylation in tumour cells, and from a recent study suggesting that defects in DNA methylation might contribute to the genomic instability of some colorectal tumour cell lines. DNA hypomethylation has also been associated with abnormal chromosomal structures, as observed in cells from patients with ICF (Immunodeficiency, Centromeric instability and Facial abnormalities) syndrome, and in cells treated with the demethylating agent 5-azadeoxycytidine. Here we report that murine embryonic stem cells nullizygous for the major DNA methyltransferase (Dnmt1) gene exhibited significantly elevated mutation rates at both the endogenous hypoxanthine phosphoribosyltransferase (Hprt) gene and an integrated viral thymidine kinase (tk) transgene. Gene deletions were the predominant mutations at both loci. The major cause of the observed tk deletions was either mitotic recombination or chromosomal loss accompanied by duplication of the remaining chromosome. Our results imply an important role for mammalian DNA methylation in maintaining genome stability.