DNA methyltransferase 1 (DNMT1) has been reported to interact with a wide variety of factors and to contain intrinsic transcriptional repressor activity. When a conservative point mutation was introduced at the key catalytic residue, mutant DNMT1 failed to rescue any of the phenotypes of Dnmt1-null embryonic stem (ES) cells, which indicated that the biological functions of DNMT1 are exerted through the methylation of DNA. ES cells that expressed the mutant protein did not survive differentiation. Intracisternal A-particle family retrotransposons were no longer methylated and were transcribed at high levels. The proper localization of DNMT1 depended on normal genomic methylation, and we discuss the implications of this finding for epigenetic dysregulation in cancer.