The normal epithelial cell-specific-1 (NES1)/kallikrein 10 gene is expressed in normal mammary epithelial cells, but its expression is dramatically decreased in breast cancer cell lines. Now, we have cloned and characterized the active promoter region of NES1. Using a luciferase reporter system, we demonstrate that most tumor cell lines are able to support full or partial transcription from the NES1 promoter, suggesting a role for promoter-independent cis-acting mechanisms of loss of NES1 expression. We show that hypermethylation of the NES1 gene represents one such mechanism. Using methylation-specific PCR and sequence analysis of sodium bisulfite-treated genomic DNA, we demonstrate a strong correlation between exon 3 hypermethylation and loss of NES1 mRNA expression in a panel of breast cancer cell lines and in primary tumors. Treatment of NES1-nonexpressing cells with a demethylating agent led to reexpression of NES1, suggesting an important role of hypermethylation in the loss of NES1 expression. We suggest that hypermethylation is responsible for tumor-specific loss of NES1 gene expression. Our results also suggest that hypermethylation of the NES1 gene may serve as a potential marker for breast cancer.