The structural genes (PEM1 and PEM2) encoding the enzymes involved in the yeast phosphatidylethanolamine (PE) methylation pathway were cloned by means of genetic complementation using yeast mutants. The cloned genes were expressed in a yeast mutant that was completely deficient in the PE methylation pathway. The membrane fraction obtained from the transformants carrying PEM1 only catalyzed the conversion of PE to phosphatidyl-N-monomethylethanolamine (PMME), the first step of the methylation pathway. Therefore, the enzyme encoded by PEM1 was designated as PE methyltransferase. In contrast, the membrane fraction from the transformants carrying PEM2 catalyzed the synthesis of phosphatidylcholine (PC) from PE, indicating that it contains all of the three methylation activities. PMME and phosphatidyl-N,N-dimethylethanolamine were found to be utilized more preferentially than PE. Because of its rather broad substrate specificity, the enzyme encoded by PEM2 is designated as phospholipid methyltransferase. The results of phospholipid composition analysis showed that the PEM1 transformant accumulated PMME whereas the PEM2 transformant contained a decreased amount of PC. Both genes were required for maintenance of the PC content of the yeast at a normal level. The results of nucleotide sequence analysis demonstrated that the coding frames of the PEM1 and PEM2 genes were capable of encoding 869- and 206-amino acid residues with calculated molecular weights of 101,202 and 23,150, respectively. The sizes of the PEM1 and PEM2 transcripts detected in the exponentially growing wild-type yeast were consistent with those of the deduced translation products. PE methyltransferase exhibits internal sequence homology as well as homology with phospholipid methyltransferase, suggesting that these two methyltransferase genes evolved through gene duplication. Furthermore, there was significant sequence homology between PE methyltransferase and bovine phenylethanolamine N-methyltransferase, and between phospholipid methyltransferase and Escherichia coli S-adenosylmethionine-6-N',N'-adenosyl (rRNA) dimethyltransferase.