DNA methylation, or the addition of methyl groups to cytosine bases in the dinucleotide CpG, is imperative to proper development and regulates gene expression. The methylation pattern involves the enzymatic processes of methylation and demethylation. A demethylase enzyme has been identified which exhibits demethylase activity associated to a methyl-CpG-binding domain (MBD). The enzyme is able to revert methylated cytosine bases to cytosines within the particular dinucleotide sequence mdCpdG by catalyzing the cleaving of the methyl group as methanol. MeCP2 and MBD1 (PCM1) repress transcription by binding specifically to methylated DNA. MBD2 and MBD4 (also known as MED1) co-localize with foci of heavily methylated satellite DNA and mediate the biological functions of the methylation signal. Surprisingly, MBD3 does not bind methylated DNA either in vivo or in vitro. MeCP2, MBD1, MBD2, MBD3, and MBD4 are expressed in somatic tissues, but the expression of MBD1 and MBD2 is reduced or absent in embryonic stem cells, which are known to be deficient in MeCP1 activity. MBD4 has homology to bacterial base excision repair DNA N-glycosylases/lyases. In some microsatellite unstable tumors MBD4 is mutated at an exonic polynucleotide tract.