The tumor necrosis factor (TNF-alpha or TNF) gene is activated by both lipopolysaccharide (LPS) and cycloheximide in RAW 264.7 macrophages, whereas neither stimulus activates the gene in 3T3 fibroblasts. Moreover, the pattern of CG methylation within the TNF gene is readily distinguishable in DNA derived from cells of these two types. These findings would suggest that the TNF gene has been rendered inaccessible to transcription in the 3T3 cell environment. When RAW 264.7 cells are fused with 3T3 cells, an immortal pentaploid hybrid results. In the hybrid cell, all three TNF genes contributed by the RAW 264.7 cell parent become highly methylated according to the pattern observed in the 3T3 cell parent. Permanently transfected chloramphenicol acetyl transferase (CAT) reporter constructs, bearing 2.2 kb of upstream sequence (including the entire TNF promoter and 5'-untranslated region [UTR]) as well as 1.0 kb of downstream sequence (including the entire TNF 3'-UTR and termination sequence), are accessible in both RAW 264.7 cells and 3T3 cells, but are silenced in transition from the RAW 264.7 cell to the hybrid cell environment. Moreover, the endotoxin signaling pathway is abrogated, as assessed by transient transfection of hybrid cells with LPS-responsive CAT reporter constructs. It would therefore appear that the fusion of 3T3 cells and RAW 264.7 cells activates a system that silences the TNF gene, as well as the LPS signaling pathway. This system may operate to determine TNF gene accessibility and LPS responsiveness in the course of cell differentiation. The DNA sequences targeted within the TNF gene are included in the CAT reporter construct; therefore, the silencing element has been circumscribed to a region of DNA 3.2 kb in length.