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A range of molecular alterations found in tumor cells, such as DNA mutations and DNA methylation, is reflected in cell-free circulating DNA (circDNA) released from the tumor into the blood, thereby making circDNA an ideal candidate for the basis of a blood-based cancer diagnosis test. In many cancer types, mutations driving tumor development and progression are present in a wide range of oncogenes and tumor suppressor genes. However, even when a gene is consistently mutated in a particular cancer, the mutations can be spread over very large regions of its sequence, making evaluation difficult. This diversity of sequence changes in tumor DNA presents a challenge for the development of blood tests based on DNA mutations for cancer diagnosis. Unlike mutations, DNA methylation that can be consistently measured, as it tends to occur in specific regions of the DNA called CpG islands. Since DNA methylation is reflected within circDNA, detection of tumor-specific DNA methylation in patient plasma is a feasible approach for the development of a blood-based test. Aberrant circDNA methylation has been described in most cancer types and is actively being investigated for clinical applications. A commercial blood test for colorectal cancer based on the methylation of the SEPT9 promoter region in circDNA is under review for approval by the Federal Drug Administration (FDA) for clinical use. In this paper, we review the state of research in circDNA methylation as an application for blood-based diagnostic tests in colorectal, breast, lung, pancreatic and ovarian cancers, and we consider some of the future directions and challenges in this field. There are a number of potential circDNA biomarkers currently under investigation, and experience with SEPT9 shows that the time to clinical translation can be relatively rapid, supporting the promise of circDNA as a biomarker.