Vertebrate DNA methyltransferases (DNMTs) have been thought to primarily function to covalently add a methyl group to the 5-position of cytosine. However, recent discovery of the DNA demethylation and dehydroxymethylation activities of DNMTs in vitro suggest new routes to complete the dynamic cycle of DNA methylation–demethylation of the vertebrate genomes. The in vitro reaction conditions suggest that vertebrate DNMTs can switch from DNA methylases to DNA dehydroxymethylases under oxidative stress and to DNA demethylases in the presence of calcium ion under nonreducing conditions. These environmental parameters provide clues regarding the choices in vivo of DNMT activities utilized in different physiological systems. In particular, the nature of these parameters suggest that the DNA demethylation and dehydroxymethylation activities of the vertebrate DNMTs play essential roles in multiple biological processes including early embryo development, regulation of neuronal plasticity, tumorigenesis and hormone-regulated transcription.