An in vitro DNA synthesizing system from mouse fibroblasts has been used to study DNA methylation. DNA methylation occurs in two phases, one at the replication fork and the other farther behind it. Although 4% of the dCMP residues in mouse cell DNA are mdCMP, only 1.7% of the total [alpha 32P]dCMP in newly replicated DNA is methylated in vitro. No methylation of Okazaki fragments was detected. Nearest neighbor analysis of the newly replicated DNA revealed that, although 40% of the CpG dinucleotides were methylated, significant amounts of cytosine methylation were also found in CpC, CpT, and CpA dinucleotides.