Diverse post-translational modifications of histone amino termini represent an important epigenetic mechanism for the organisation of chromatin structure and the regulation of gene activity. Within the past two years, great progress has been made in understanding the functional implications of histone methylation; in particular through the characterisation of histone methyltransferases that direct the site-specific methylation of, for example, lysine 9 and lysine 4 positions in the histone H3 amino terminus. All known histone methyltransferases of this type contain the evolutionarily conserved SET domain and appear to be able to stimulate either gene repression or gene activation. Methylation of H3 Lys9 and Lys4 has been visualised in native chromatin, indicating opposite roles in structuring repressive or accessible chromatin domains. For example, at the mating-type loci in Schizosaccharomyces pombe, at pericentric heterochromatin and at the inactive X chromosome in mammals, striking differences between these distinct marks have been observed. H3 Lys9 methylation is also important to direct additional epigenetic signals such as DNA methylation — for example, in Neurospora crassa and in Arabidopsis thaliana. Together, the available data strongly establish histone lysine methylation as a central modification for the epigenetic organisation of eukaryotic genomes.