Mink cells morphologically transformed by either Snyder-Theilen feline sarcoma virus (ST-FeSV) or Abelson murine leukemia virus (Abelson-MuLV) exhibit relatively high rates of reversion to the nontransformed phenotype. The proviral DNAs are conserved within the revertant lines and have not undergone changes in integration sites due to translocations or other genomic rearrangements. In contrast, expression of well-defined viral-encoded transforming proteins is blocked and elevated levels of phosphotyrosine characteristic of the parental transformed cells are reduced to control levels. Loss of the transformed phenotype is associated with increased cytosine methylation of proviral DNA sequences while levels of methylation resume control levels upon spontaneous retransformation of revertant clones. Following molecular cloning, and transfection to Rat-2 cells, ST-FeSV proviral DNAs from revertant and transformed cells induced similar numbers of transformed foci. Cytosine methylation sites involved in regulation of expression of the major ST-FeSV encoded transforming protein have been localized within the proviral DNA itself rather than in adjacent cellular flanking sequences. In contrast to the v-fes proviral DNA, c-fes, the cellular homolog of the ST-FeSV acquired transforming sequences, is highly methylated in cytosine residues in both transformed and revertant clones. These findings demonstrate regulation of viral oncogene-mediated transformation by cytosine methylation and suggest that expression of cellular homologs of viral oncogenes, such as c-fes, are also subject to regulation at this level.