Histone H3 methylation at R17 and R26 recently emerged as a novel epigenetic mechanism regulating pluripotency in mouse embryos. Blastomeres of four-cell embryos with high H3 methylation at these sites show unrestricted potential, whereas those with lower levels cannot support development when aggregated in chimeras of like cells. Increasing histone H3 methylation, through expression of coactivator-associated-protein-arginine-methyltransferase 1 (CARM1) in embryos, elevates expression of key pluripotency genes and directs cells to the pluripotent inner cell mass. We demonstrate CARM1 is also required for the self-renewal and pluripotency of embryonic stem (ES) cells. In ES cells, CARM1 depletion downregulates pluripotency genes leading to their differentiation. CARM1 associates with Oct4/Pou5f1 and Sox2 promoters that display detectable levels of R17/26 histone H3 methylation. In CARM1 overexpressing ES cells, histone H3 arginine methylation is also at the Nanog promoter to which CARM1 now associates. Such cells express Nanog at elevated levels and delay their response to differentiation signals. Thus, like in four-cell embryo blastomeres, histone H3 arginine methylation by CARM1 in ES cells allows epigenetic modulation of pluripotency.