The arginine methyltransferase PRMT6 (protein arginine methyltransferase 6) has been shown recently to regulate DNA repair and gene expression. As arginine methylation of histones is an important mechanism in transcriptional regulation, we asked whether PRMT6 possesses activity toward histones. We show here that PRMT6 methylates histone H3 at R2 and histones H4/H2A at R3 in vitro. Overexpression and knockdown analysis identify PRMT6 as the major H3 R2 methyltransferase in vivo. We find that H3 R2 methylation inhibits H3 K4 trimethylation and recruitment of WDR5, a subunit of the MLL (mixed lineage leukemia) K4 methyltransferase complex, to histone H3 in vitro. Upon PRMT6 overexpression, transcription of Hox genes and Myc-dependent genes, both well-known targets of H3 K4 trimethylation, decreases. This transcriptional repression coincides with enhanced occurrence of H3 R2 methylation and PRMT6 as well as reduced levels of H3 K4 trimethylation and MLL1/WDR5 recruitment at the HoxA2 gene. Upon retinoic acid-induced transcriptional activation of HoxA2 in a cell model of neuronal differentiation, PRMT6 recruitment and H3 R2 methylation are diminished and H3 K4 trimethylation increases at the gene. Our findings identify PRMT6 as the mammalian methyltransferase for H3 R2 and establish the enzyme as a crucial negative regulator of H3 K4 trimethylation and transcriptional activation.