Methylation of the arginine residues of histones by methyltransferases has important consequences for chromatin structure and gene regulation; however, the molecular mechanism(s) of methyltransferase regulation is still unclear, as is the biological significance of methylation at particular arginine residues. Here, we report a novel specific inhibitor of coactivator-associated arginine methyltransferase 1 (CARM1; also known as PRMT4) that selectively inhibits methylation at arginine 17 of histone H3 (H3R17). Remarkably, this plant-derived inhibitor, called TBBD (ellagic acid), binds to the substrate (histone) preferentially at the signature motif, "KAPRK," where the proline residue (Pro-16) plays a critical role for interaction and subsequent enzyme inhibition. In a promoter-specific context, inhibition of H3R17 methylation represses expression of p21, a p53-responsive gene, thus implicating a possible role for H3 Arg-17 methylation in tumor suppressor function. These data establish TBBD as a novel specific inhibitor of arginine methylation and demonstrate substrate sequence-directed inhibition of enzyme activity by a small molecule and its physiological consequence.