The enhancer/promoter of the vitellogenin II gene (VTG) has been extensively studied as a model system of vertebrate transcriptional control. While deletion mutagenesis and in vivo footprinting identified the transcription factor (TF) binding sites governing its tissue specificity, DNase hypersensitivity and DNA methylation studies revealed the epigenetic changes accompanying its hormone-dependent activation. Moreover, upon induction with estrogen (E2), the region flanking the estrogen-responsive element (ERE) was reported to undergo active DNA demethylation. We now show that although the VTG ERE is methylated in embryonic chicken liver and in LMH/2A hepatocytes, its induction by E2 was not accompanied by extensive demethylation. In contrast, E2 failed to activate a VTG enhancer/promoter-controlled luciferase reporter gene methylated by SssI. Surprisingly, this inducibility difference could be traced not to the ERE but rather to a single CpG in an E-box (CACGTG) sequence upstream of the VTG TATA box, which is unmethylated in vivo but methylated by SssI. We demonstrate that this E-box binds the upstream stimulating factor USF1/2. Selective methylation of the CpG within this binding site with an E-box-specific DNA methyltransferase, Eco72IM, was sufficient to attenuate USF1/2 binding in vitro and abolish the hormone-induced transcription of the VTG gene in the reporter system.