Epigenetic alteration through DNA methylation in retinoic acid receptor-beta2 (RAR-beta2) is common in human tumors including nasopharyngeal carcinoma (NPC); however, the mechanism and its biological significance are unknown. Here, we report that the Epstein-Barr virus (EBV) oncogene product, latent membrane protein 1 (LMP1), induces promoter hypermethylation of RAR-beta2 via up-regulation of DNA methyltransferases 1, 3a, and 3b, leading to decrease in RAR-beta2 expression in NPC cells. In addition, LMP1 abolished the potentials of retinoic acid (RA) to down-regulate Cdk2 and Cdk4 and to up-regulate p16, p21, and p27, resulting in activation of E2F1 in the presence of RA. As a consequence, LMP1 could abrogate the growth-inhibitory effect of RA by releasing cell cycle arrest at G1 phase. Considering that RAR-beta2 is a major executor of the anti-tumor potentials of retinoids, its down-regulation by LMP1 might play an important role during EBV-mediated tumorigenesis.