In mammalian heterochromatin, cytosine bases of CpG dinucleotides are symmetrically modified by methylation. Patterns of CpG methylation are maintained by the action of Dnmt1, the mammalian maintenance cytosine methyltransferase enzyme. We genetically manipulated the levels of CpG methylation and found that extensive chromatin alterations occur in pericentric heterochromatin. Homozygous mutations in Dnmt1 cause severe hypomethylation of pericentric heterochromatin and concomitant chromatin reorganization involving the histone variant macroH2A. Demethylation-induced alterations in macroH2A localization occur in both interphase and mitotic embryonic stem (ES) cells. Heterochromatin protein 1 (HP1) marks interphase pericentric heterochromatin (chromocenters). MacroH2A immunostaining in Dnmt1(-/-) cells becomes coincident with chromocenters detected by HP1 content. MacroH2A, but not HP1, is enriched in nuclease-resistant chromatin fractions extracted from Dnmt1(-/-) cells. Normal localization of macroH2A was restored upon reintroduction of a Dnmt1 transgene into Dnmt1(-/-) cells. MacroH2A localization was also affected in T-antigen-transformed fibroblasts subjected to the conditional mutation of Dnmt1. Together, these results suggest that pericentric heterochromatin can be maintained in the absence of CpG methylation, but in a significantly altered configuration.