The preferential in vitro methylation of histone H3 by coactivator-associated arginine methyltransferase 1 (CARM1) has been proposed as a basis for its ability to enhance gene transcription [Chen, D., et al. (1999) Science 284, 2174-2177]. To further evaluate the significance of H3 methylation, we studied the kinetics and site specificity of its modification by CARM1. Affinity-purified CARM1 methylated recombinant chick H3, which is free of posttranslational modifications, and calf thymus H3, which is heterogeneous with regard to preexisting modifications, equally well, exhibiting a V(max) of 4500 pmol min(-1) (mg of enzyme)(-1) and an apparent K(m) for H3 of < or = 0.2 microM. The catalytic efficiency (k(cat)/K(m)) of CARM1 toward H3 was at least 1000 times that toward R1 (GGFGGRGGFGG-amide), a highly effective substrate for protein arginine methyltransferase 1. Peptide mapping of 3H-methyl-labeled H3 indicated methylation at Arg-2, Arg-17, and Arg-26 in the N-terminal region and at one or more of four arginines (128/129/131/134) at the C-terminus. Two of the N-terminal sites, Arg-17 and Arg-26, occur in the sequence KAXRK and appear to be more efficiently methylated than Arg-2. CARM1 catalyzed formation of N(G),N(G)-dimethylarginine (asymmetric) but little or no N(G),N'(G)-dimethylarginine (symmetric) and no form of methyllysine. Amino acid analysis of untreated calf thymus H3 revealed that 3.7% of the molecules naturally contain asymmetric dimethylarginine and/or monomethylarginine. Our findings support the hypothesis that methylation of H3 may be involved in the mechanism of transcriptional coactivation by CARM1 of genes whose expression is under the control of nuclear receptors.