The enhancer/promoter of the vitellogenin II (VTG) gene 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 methyltranferase Eco72IM was sufficient to attenuate USF1/2 binding in vitro and abolish the hormone-induced transcription of the VTG gene in the reporter system.