We have cloned the M and S genes of the restriction‐modification (R‐M) system AhdI and have purified the resulting methyltransferase to homogeneity. M.AhdI is found to form a 170 kDa tetrameric enzyme having a subunit stoichiometry M2S2 (where the M and S subunits are responsible for methylation and DNA sequence specificity, respectively). Sedimentation equilibrium experiments show that the tetrameric enzyme dissociates to form a heterodimer at low concentration, with Kd ≈ 2 µM. The intact (tetrameric) enzyme binds specifically to a 30 bp DNA duplex containing the AhdI recognition sequence GACN5GTC with high affinity (Kd ≈ 50 nM), but at low enzyme concentration the DNA binding activity is governed by the dissociation of the tetramer into dimers, leading to a sigmoidal DNA binding curve. In contrast, only non‐specific binding is observed if the duplex lacks the recognition sequence. Methylation activity of the purified enzyme was assessed by its ability to prevent restriction by the cognate endonuclease. The subunit structure of the M.AhdI methyltransferase resembles that of type I MTases, in contrast to the R.AhdI endonuclease which is typical of type II systems. AhdI appears to be a novel R‐M system with properties intermediate between simple type II systems and more complex type I systems, and may represent an intermediate in the evolution of R‐M systems.