A novel, site-specific, DNA backbone S-modification (phosphorothioation) has been discovered, but its in vivo function(s) have remained obscure. Here, we report that the enteropathogenic Salmonella enterica serovar Cerro 87, which possesses S-modified DNA, restricts DNA isolated from Escherichia coli, while protecting its own DNA by site-specific phosphorothioation. A cloned 15-kb gene cluster from S. enterica conferred both host-specific restriction and DNA S-modification on E. coli. Mutational analysis of the gene cluster proved unambiguously that the S-modification prevented host-specific restriction specified by the same gene cluster. Restriction activity required three genes in addition to at least four contiguous genes necessary for DNA S-modification. This functional overlap ensures that restriction of heterologous DNA occurs only when the host DNA is protected by phosphorothioation. Meanwhile, this novel type of host-specific restriction and modification system was identified in many diverse bacteria. As in the case of methylation-specific restriction systems, targeted inactivation of this gene cluster should facilitate genetic manipulation of these bacteria, as we demonstrate in Salmonella.