Whole genome sequencing of several metazoan model organisms provides a platform for studying genome evolution. How representative are the genomes of these model organisms for their respective phyla? Within nematodes, for example, the free-living soil nematode Caenorhabditis elegans is a highly derived species with unusual genomic characters, such as a reduced Hox cluster (Curr. Biol., 13, 37-40) and the absence of a Hedgehog signaling system. Here, we describe the recent loss of a DNA methyltransferase-2 gene (dnmt-2) in C.elegans. A dnmt-2-like gene is present in the satellite model organism Pristionchus pacificus, another free-living nematode that diverged from C.elegans 200-300 million years ago. In contrast, C.elegans, Caenorhabditis briggsae and P.pacificus all contain an mbd-2-like gene, which encodes another essential component of the methylation system of higher animals and fungi. Cel-mbd-2 is expressed throughout development and RNA interference (RNAi) experiments result in variable phenotypes. In contrast, Cbr-mbd-2 RNAi results in paralyzed larval or adult worms suggesting recent changes of gene function within the genus Caenorhabditis. We speculate that both genes were part of an ancestral DNA methylation system in nematodes and that gene loss and sequence divergence have abolished DNA methylation in C.elegans.