The protooncogene c-myc was investigated in N-nitrosomorpholine-induced rat liver nodules to elucidate the role of altered DNA methylation in chemical carcinogenesis. Furthermore, Micrococcus luteus DNA and chicken erythrocyte DNA were modified in vitro by reactive metabolites of N-nitrosomorpholine, generated by P450-dependent monooxygenases. The modified DNAs were less methylated in vitro than control DNAs by DNA-(cytosine-5)-methyltransferase (DNA methylase). The DNA methylase assay and 32P-postlabeling analysis revealed lowered levels of DNA methylation in nodular DNA. In nodular tissue, c-myc messenger RNA levels were found to be increased compared to normal liver. DNA methylation analysis using the restriction endonucleases HpaII/MspI indicated hypomethylation in the first intron of c-myc DNA in liver nodules. The results suggest that genotoxic lesions may cause stably inherited, aberrant DNA methylation patterns which may be responsible for site-specific hypomethylation of the c-myc protooncogene in liver nodules.