Coactivator-associated arginine methyltransferase 1 (CARM1) is known to promote estrogen receptor (ER)α-mediated transcription in breast cancer cells. To further characterize the regulation of ERα-mediated transcription by CARM1, we screened CARM1-interacting proteins by yeast two-hybrid. Here, we have identified an E3 ubiquitin ligase, DAZ (deleted in azoospermia)-interacting protein 3 (DZIP3), as a novel CARM1-binding protein. DZIP3-dependent ubiquitination of histone H2A has been associated with repression of transcription. However, ERα reporter gene assays demonstrated that DZIP3 enhanced ERα-mediated transcription and cooperated synergistically with CARM1. Interaction with CARM1 was observed with the E3 ligase RING domain of DZIP3. The methyltransferase activity of CARM1 partially contributed to the synergy with DZIP3 for transcription activation, but the E3 ubiquitin ligase activity of DZIP3 was dispensable. DZIP3 also interacted with the C-terminal activation domain 2 of glucocorticoid receptor-interacting protein 1 (GRIP1) and enhanced the interaction between GRIP1 and CARM1. Depletion of DZIP3 by small interfering RNA in MCF7 cells reduced estradiol-induced gene expression of ERα target genes, GREB1 and pS2, and DZIP3 was recruited to the estrogen response elements of the same ERα target genes. These results indicate that DZIP3 is a novel coactivator of ERα target gene expression.