Myofibroblasts are critical cellular elements of wound healing generated at sites of injury by transdifferentiation of resident cells. A paradigm for this process is conversion of hepatic stellate cells (HSC) into hepatic myofibroblasts. Treatment of HSC with DNA methylation inhibitor 5-aza-2'-deoxycytidine (5-azadC) blocked transdifferentiation. 5-azadC also prevented loss of IkappaBalpha and PPARgamma expression that occurs during transdifferentiation to allow acquisition of proinflammatory and profibrogenic characteristics. ChIP analysis revealed IkappaBalpha promoter is associated with transcriptionally repressed chromatin that converts to an active state with 5-azadC treatment. The methyl-CpG-binding protein MeCP2 which promotes repressed chromatin structure is selectively detected in myofibroblasts of diseased liver. siRNA knockdown of MeCP2 elevated IkappaBalpha promoter activity, mRNA and protein expression in myofibroblasts. MeCP2 interacts with IkappaBalpha promoter via a methyl-CpG-dependent mechanism and recruitment into a CBF1 corepression complex. We conclude that MeCP2 and DNA methylation exert epigenetic control over hepatic wound healing and fibrogenesis.