Together with impaired glucose uptake in skeletal muscle, elevated hepatic gluconeogenesis is largely responsible for the hyperglycemic phenotype in type II diabetic patients. Intracellular glucocorticoid and cyclic adenosine monophosphate (cAMP)/protein kinase A-dependent signaling pathways contribute to aberrant hepatic glucose production through the induction of gluconeogenic enzyme gene expression. Here we show that the coactivator-associated arginine methyltransferase 1 (CARM1) is required for cAMP-mediated activation of rate-limiting gluconeogenic phosphoenolpyruvate carboxykinase (PEPCK; EC 4.1.1.32) and glucose-6-phosphatase genes. Mutational analysis showed that CARM1 mediates its effect via the cAMP-responsive element within the PEPCK promoter, which is identified here as a CARM1 target in vivo. In hepatocytes, endogenous CARM1 physically interacts with cAMP-responsive element binding factor CREB and is recruited to the PEPCK and glucose-6-phosphatase promoters in a cAMP-dependent manner associated with increased promoter methylation. CARM1 might, therefore, represent a critical component of cAMP-dependent glucose metabolism in the liver.