Frog virus 3 (FV3) DNA is the most highly methylated DNA of any known DNA virus; about 20% of the cytosine residues in FV3 DNA are methylated (D. Willis and A. Granoff, 1980, Virology 107, 250-257). To understand the role of DNA methylation in virus replication, we have examined the effect of 5-azacytidine, a drug that inhibits DNA methylation. 5-Azacytidine (10 microM) reduced the production of infectious FV3 by 100-fold or more and inhibited methylation of viral DNA by about 80%. Inhibition of DNA methylation did not affect viral gene expression since there was no detectable inhibition of virus-specific RNA or protein synthesis in 5-azacytidine-treated cells. In contrast, the size of the replicating DNA measured under completely denaturing conditions, was much smaller than that found during infection in the absence of drug. These results suggest that the undermethylated DNA was susceptible to endodeoxyribonuclease(s). Additionally, electron microscopic examination of FV3-infected, 5-azacytidine-treated cells revealed that preformed capsids remained empty or were only partially filled with viral DNA. Based on these data, it is suggested that methylation of DNA protects it from endonucleolytic cleavage and that the integrity of genomic DNA is required for its proper packaging into virions.