Epigenetic mechanisms contribute to the establishment and maintenance of cell-type-specific gene expression patterns. In this review, we focus on the functions of histone lysine methylation in the context of epigenetic gene regulation during developmental transitions. Over the past few years, analysis of histone lysine methylation in active and repressive nuclear compartments and, more recently, genome-wide profiling of histone lysine methylation in different cell types have revealed correlations between particular modifications and the transcriptional status of genes. Identification of histone methyltransferases (HMTases) and specific binding factors for most methylated lysine positions has provided a novel insight into the mechanisms of epigenetic gene regulation. In addition, analyses of HMTase knockout mice show that histone lysine methylation has important functions for normal development. In this study, we review mechanisms of gene activation and repression by histone lysine methylation and discuss them in the context of the developmental roles of HMTases.