Abstract Breast cancers with estrogen receptor α (ERα) expression are often more differentiated histologically than ERα-negative tumors, but the reasons for this difference are poorly understood. One possible explanation is that transcriptional cofactors associated with ERα determine the expression of genes which promote a more differentiated phenotype. In this study, we identify one such cofactor as coactivator-associated arginine methyltransferase 1 (CARM1), a unique coactivator of ERα that can simultaneously block cell proliferation and induce differentiation through global regulation of ERα-regulated genes. CARM1 was evidenced as an ERα coactivator in cell-based assays, gene expression microarrays, and mouse xenograft models. In human breast tumors, CARM1 expression positively correlated with ERα levels in ER-positive tumors but was inversely correlated with tumor grade. Our findings suggest that coexpression of CARM1 and ERα may provide a better biomarker of well-differentiated breast cancer. Furthermore, our findings define an important functional role of this histone arginine methyltransferase in reprogramming ERα-regulated cellular processes, implicating CARM1 as a putative epigenetic target in ER-positive breast cancers. Cancer Res; 71(6); 2118–28. ©2011 AACR.