Lysine methylation of histones in vivo occurs in three states: mono-, di- and tri-methyl. Histone H3 has been found to be di-methylated at lysine 4 (K4) in active euchromatic regions but not in silent heterochromatic sites. Here we show that the Saccharomyces cerevisiae Set1 protein can catalyse di- and tri-methylation of K4 and stimulate the activity of many genes. Using antibodies that discriminate between the di- and tri-methylated state of K4 we show that di-methylation occurs at both inactive and active euchromatic genes, whereas tri-methylation is present exclusively at active genes. It is therefore the presence of a tri-methylated K4 that defines an active state of gene expression. These findings establish the concept of methyl status as a determinant for gene activity and thus extend considerably the complexity of histone modifications.