Toxic and mutagenic O6-alkylguanine adducts in DNA are repaired by O6-alkylguanine-DNA alkyltransferases (MGMT) by transfer of the alkyl group to a cysteine residue in the active site. Comparisons in silico of prokaryotes and lower eukaryotes reveal the presence of a group of proteins [alkyltransferase-like (ATL) proteins] showing amino acid sequence similarity to MGMT, but where the cysteine at the putative active site is replaced by tryptophan. To examine whether ATL proteins play a role in the biological effects of alkylating agents, we inactivated the gene, referred to as atl1+, in Schizosaccharomyces pombe, an organism that does not possess a functional MGMT homologue. The mutants are substantially more susceptible to the toxic effects of the methylating agents, N-methyl-N-nitrosourea, N-methyl-N'nitro-N-nitrosoguanidine and methyl methanesulfonate and longer chain alkylating agents including N-ethyl-N-nitrosourea, ethyl methanesulfonate, N-propyl-N-nitrosourea and N-butyl-N-nitrosourea. Purified Atl1 protein does not transfer methyl groups from O6-methylguanine in [3H]-methylated DNA but reversibly inhibits methyl transfer by human MGMT. Atl1 binds to short single-stranded oligonucleotides containing O6-methyl, -benzyl, -4-bromothenyl or -hydroxyethyl-guanine but does not remove the alkyl group or base and does not cleave the oligonucleotide in the region of the lesion. This suggests that Atl1 acts by binding to O6-alkylguanine lesions and signalling them for processing by other DNA repair pathways. This is the first report describing an activity that protects S.pombe against the toxic effects of O6-alkylguanine adducts and the biological function of a family of proteins that is widely found in prokaryotes and lower eukaryotes.