The biochemical mechanism of short RNA-induced TGS (transcriptional gene silencing) in mammals is unknown. Two competing models exist; one suggesting that the short RNA interacts with a nascent transcribed RNA strand (RNA-RNA model) and the other implying that short RNA forms a heteroduplex with DNA from the unwound double helix, an R-loop structure (RNA-DNA model). Likewise, the requirement for DNA methylation to enact TGS is still controversial. In vitro assays using purified recombinant murine Dnmt (DNA methyltransferase) 1-dN (where dN indicates an N-terminal truncation), 3a and 3b enzymes and annealed oligonucleotides were designed to question whether Dnmts methylate DNA in a RNA-DNA heteroduplex context and whether a RNA-DNA heteroduplex R-loop is a good substrate for Dnmts. Specifically, model synthetic oligonucleotides were used to examine methylation of single-stranded oligonucleotides, annealed oligonucleotide duplexes, RNA-DNA heteroduplexes, DNA bubbles and R-loops. Dnmt methylation activity on the model substrates was quantified with initial velocity assays, novel ARORA (annealed RNA and DNA oligonucleotide-based methylation-sensitive restriction enzyme analysis), tBS (tagged-bisulfite sequencing) and the quantitative PCR-based method MethylQuant. We found that RNA-DNA heteroduplexes and R-loops are poor substrates for methylation by both the maintenance (Dnmt1) and de novo (Dnmt3a and Dnmt3b) Dnmts. These results suggest the proposed RNA/DNA model of TGS in mammals is unlikely. Analysis of tagged-bisulfite genomic sequencing led to the unexpected observation that Dnmt1-dN can methylate cytosines in a non-CpG context in DNA bubbles. This may have relevance in DNA replication and silencing of transcriptionally active loci in vivo.