The N-3 drug resistance (R) factor specifies a deoxyribonucleic acid (DNA)-cytosine methylase and a DNA restriction-modification (hspII) system. We have isolated three independent mutants that are conditionally defective in their ability to modify bacteriophage lambda and to methylate DNA-cytosine residues. The ratio of 5-methylcytosine to N(6)-methyladenine in bacterial DNA and in the DNA of phages lambda and fd was determined after labeling with [methyl-(3)H]methionine at various growth temperatures. Although the ability of the wild-type N-3 factor to modify phage lambda and to methylate DNA-cytosine residues was unaffected with increasing temperature, two of the mutants exhibited a parallel loss in modification and cytosine methylation ability. The ability of the third mutant to carry out these functions was dependent on the presence or absence of an amber suppressor mutation in the host genome. These results offer further support for the notion that hspII modification is mediated by a DNA-cytosine methylase. Evidence is also presented that the modification methylase is responsible for the in vivo methylation of phage fd DNA (which is not subject to hspII restriction in vivo).