Final answer:
In E. coli, mismatch repair system distinguishes the template strand from the new strand by recognizing methyl groups on the template strand, which allows repair enzymes to bind and correct mismatches on the unmethylated new strand.
Step-by-step explanation:
In E. coli, the mismatch repair system distinguishes the template DNA strand from the newly synthesized DNA strand by recognizing the presence of methyl groups on the template strand. The methylation occurs after replication where the nitrogenous base adenine on the parental DNA strand acquires a methyl group. The newly synthesized strand, however, remains unmethylated for some time, allowing repair enzymes such as MutS, MutL, and MutH to recognize and bind to the hemimethylated sites of DNA. This facilitates the repair process where MutH cuts the nonmethylated strand, the exonuclease removes the segment containing the mismatch, and DNA polymerase III and ligase fill in and seal the gap.
This kind of repair mechanism is critical, as it ensures genome stability by correcting errors that were not fixed during the replication process, thus preventing the inheritance of mutations. The process relies heavily on the methylated state of the parental DNA strand to identify and make corrections on the newly synthesized strand.