Oct-3/4 is the earliest expressed transcription factor that is known to be crucial in murine pre-implantation development. In this report we asked whether methylation participates in controlling changes in Oct-3/4 expression and thus may play an important role in controlling normal embryogenesis. We show that the Oct-3/4 gene is unmethylated from the blastula stage but undergoes de novo methylation at 6.5 days post-coitum and remains modified in all adult somatic tissues analyzed. Oct-3/4 remains unmethylated in 6.25 days post-coitum epiblast cells when other genes, such as apoAI, undergo de novo methylation. We show that methylation of the Oct-3/4 promoter sequence strongly compromises its ability to direct efficient transcription. Moreover, DNA methylation inhibits basal transcription of the endogenous Oct-3/4 gene in vivo. We found that the Oct-3/4 gene harbors a cis-specific demodification element that includes the proximal enhancer sequence. This element leads to demethylation in embryonal carcinoma cells when the sequence is initially methylated and protects the local region from de novo methylation in post-implantation embryos. These results indicate that in the embryo protection from de novo methylation is not a unique feature of imprinted or housekeeping genes that carry a CpG island, but is also applicable to tissue-specific genes expressed during early stages of embryogenesis. Methylation of Oct-3/4 may be analogous to methylation of CpG islands on the inactive X chromosome that also occurs at later stages of development.