We previously identified and characterized biochemically an O6-methylguanine (O6MeG) DNA repair methyltransferase (MTase) in the yeast Saccharomyces cerevisiae and showed that it recognizes both O6MeG and O4-methylthymine (O4MeT) in vitro. Here we characterize the cloned S. cerevisiae O6MeG DNA MTase gene (MGT1) and determine its in vivo role in protecting yeast from DNA alkylation damage. We isolated a yeast DNA fragment that suppressed alkylation-induced killing and mutation in Escherichia coli ada ogt MTase deficient mutants and produced in these cells a protein similar to the yeast MTase. The cloned yeast fragment was mapped to chromosome IV and DNA sequencing identified an open reading frame, designated MGT1, which encodes a 188 amino acid protein with a molecular weight of 21,500 daltons. An 88 amino acid stretch of the MGT1 protein displays remarkable homology with four bacterial MTases and the human DNA MTase. S.cerevisiae mutants bearing an insertion in the MGT1 gene lacked DNA MTase activity and were very sensitive to alkylation induced killing and mutation. MGT1 transcript levels are not increased in response to DNA alkylation damage, nor is the MGT1 MTase involved in the regulation of the yeast 3-methyladenine DNA glycosylase gene (MAG). Expression of the MGT1 gene in E.coli prevented the induction by alkylating agents of both G:C to A:T and A:T to G:C transition mutations indicating that this eukaryotic MTase repairs both O6MeG and O4MeT in vivo.