The nucleoside analog 5-azacytidine (5-aza-CR) induced marked changes in the differentiated state of cultured mouse embryo cells and also inhibited the methylation of newly synthesized DNA. The DNA strand containing 5-aza-CR remained undermethylated in the round of DNA synthesis following analog incorporation. The extent of inhibition of DNA modification and induction of muscle cells in treated cultures were dependent on the 5-aza-CR concentration over a narrow dose range. Experiments with the restriction enzyme Hpa II, which is sensitive to cytosine methylation in the sequence CCGG, demonstrated that the DNA synthesized in 5-aza-CR-treated cultures was maximally undermethylated 48 hr after treatment. Three other analogs of cytidine, containing a modification in the 5 position of the pyrimidine ring [5-aza-2'-deoxycytidine(5-aza-CdR), pseudoisocytidine (psi ICR) and 5-fluoro-2'-deoxycytidine(FCdR)] also induced the formation of muscle cells and inhibited DNA methylation. In contrast, 1-beta-D-arabinofuranosylcytosine (araC) and 6-azacytidine (6-aza-CR) did not inhibit DNA methylation or induce muscle formation, whereas 5-6-dihydro-5-azacytidine (dH-aza-CR) was a poor inducer of muscle cells and a poor inhibitor of DNA methylation. These results provide experimental evidence for a role for DNA modification in differentiation, and suggest that cytidine analogs containing an altered 5 position perturb previously established methylation patterns to yield new cellular phenotypes.