The histone coactivator-associated arginine methyltransferase 1 (CARM1) is a coactivator for a number of transcription factors, including nuclear receptors. Although CARM1 and its asymmetrically deposited dimethylation at histone H3 arginine 17 (H3R17me2a) are associated with transcription activation, the mechanism by which CARM1 activates transcription remains unclear. Using an unbiased biochemical approach, we discovered that the transcription elongation-associated PAF1 complex (PAF1c) directly interacts with H3R17me2a. PAF1c binds to histone H3 tails harboring dimethylation at R17 in CARM1-methylated histone octamers. Knockdown of either PAF1c subunits or CARM1 affected transcription of CARM1-regulated, estrogen-responsive genes. Furthermore, either CARM1 knockdown or CARM1 enzyme-deficient mutant knockin resulted in decreased H3R17me2a accompanied by the reduction of PAF1c occupancy at the proximal promoter estrogen-responsive elements. In contrast, PAF1c knockdown elicited no effects on H3R17me2a but reduced the H3K4me3 level at estrogen-responsive elements. These observations suggest that, apart from PAF1c's established roles in directing histone modifications, PAF1c acts as an arginine methyl histone effector that is recruited to promoters and activates a subset of genes, including targets of estrogen signaling.