Diacylglycerol kinases (DGKs) are important regulators of cell signaling and have been implicated in human malignancies. Whether epigenetic alterations are involved in the dysregulation of DGKs in cancer is unknown, however. We therefore analyzed methylation of the promoter CpG islands of DGK genes in colorectal cancer (CRC) cell lines. We found that DGKG, which encodes DGKγ, was hypermethylated in all CRC cell lines tested (n = 9), but was not methylated in normal colonic tissue. Correspondingly, DGKG expression was suppressed in CRC cell lines but not in normal colonic tissue, and was restored in CRC cells by treatment with the DNA methyltransferase inhibitor 5-aza-2'-deoxycytidine (5-aza-dC). DGKG methylation was frequently observed in primary CRCs (73/141, 51.8%) and was positively associated with KRAS and BRAF mutations and with the CpG island methylator phenotype (CIMP). DGKG methylation was also frequently detected in colorectal adenomas (89 of 177, 50.3%), which suggests it is an early event during colorectal tumorigenesis. Ectopic expression of wild-type DGKγ did not suppress CRC cell proliferation, but did suppress cell migration and invasion. Notably, both constitutively active and kinase-dead DGKγ mutants exerted inhibitory effects on CRC cell proliferation, migration and invasion, and the wild-type and mutant forms of DGKγ all suppressed Rac1 activity in CRC cells. These data suggest DGKG may play a tumor suppressor role in CRC.