BACKGROUND: Tumor suppressor gene (TSG) RASSF1A and candidate TSG BLU are two tandem head-to-tail genes located at 3p21.3. We hypothesized that there may be a concordance on their gene expression and promoter methylation status. If not, then there may be an insulator located between RASSF1A and BLU genes that provides a barrier activity. METHODOLOGY/PRINCIPAL FINDINGS: We first identified potential transcriptionally important CpG sites using the methylation-specific oligonucleotide array in relation to mRNA expression of RASSF1A and BLU genes in primary lung tumors. We demonstrated that E2F1 bound to the potential transcriptionally important CpG sites in RASSF1A gene of a normal lung cell line expressing RASSF1A transcripts, whereas loss of E2F1 binding to RASSF1A in A549 cancer cell line was the result of DNA methylation. Both RASSF1A and BLU genes had their own potential transcriptionally important CpG regions. However, there was no correlation of methylation status between RASSF1A and BLU. Using gel shift assay and chromatin immunoprecipitation-PCR (ChIP-PCR), we found that CCCTC-binding factor (CTCF) bound to insulator sequences located between these two genes. Bisulfite sequencing and ChIP-PCR revealed distinct methylation and chromatin boundaries separated by the CTCF binding domains in normal cells, whereas such distinct epigenetic domains were not observed in cancer cells. Note that demethylation reagent and histone deacetylase inhibitor treatments led to CTCF binding and recovery of barrier effect for RASSF1A and BLU genes in cancer cells. CONCLUSIONS/SIGNIFICANCE: Our study dissects the potential transcriptionally important CpG sites for RASSF1A and BLU genes at the sequence level and demonstrates that CTCF binding to the insulator of BLU gene provides a barrier activity within separate epigenetic domains of the juxtaposed BLU and RASSF1A loci in the 3p21.3 gene cluster region.