The RNA polymerase II mediator complex subunit 12 (MED12) is frequently mutated in human cancers, and loss of MED12 has been shown to induce drug resistance through activation of transforming growth factor–β receptor (TGF-βR) signaling. We identified MED12 as a substrate for coactivator-associated arginine methyltransferase 1 (CARM1). Not only are the expression levels of CARM1 and MED12 positively correlated, but their high expression also predicts better prognosis in human breast cancers after chemotherapy. MED12 was methylated at R1862 and R1912 by CARM1, and mutation of these sites in cell lines resulted in resistance to chemotherapy drugs. Furthermore, we showed that the methylation-dependent drug response mechanism is distinct from activation of TGF-βR signaling, because methylated MED12 potently suppresses p21/WAF1 transcription. Cells defective in MED12 methylation have up-regulated p21 protein, which correlates with poor prognosis in breast cancer patients treated with chemotherapy. Collectively, this study identifies MED12 methylation as a sensor for predicting response to commonly used chemotherapy drugs in human cancers.