Arginylation is an emerging post-translational modification mediated by arginyltransferase (ATE1) that is essential for mammalian embryogenesis and regulation of the cytoskeleton. Here, we discovered that Ate1-knockout (KO) embryonic fibroblasts exhibit tumorigenic properties, including abnormally rapid contact-independent growth, reduced ability to form cell-cell contacts and chromosomal aberrations. Ate1-KO fibroblasts can form large colonies in Matrigel and exhibit invasive behavior, unlike wild-type fibroblasts. Furthermore, Ate1-KO cells form tumors in subcutaneous xenograft assays in immunocompromised mice. Abnormal growth in these cells can be partially rescued by reintroduction of stably expressed specific Ate1 isoforms, which also reduce the ability of these cells to form tumors. Tumor array studies and bioinformatics analysis show that Ate1 is downregulated in several types of human cancer samples at the protein level, and that its transcription level inversely correlates with metastatic progression and patient survival. We conclude that Ate1-KO results in carcinogenic transformation of cultured fibroblasts, suggesting that in addition to its previously known activities Ate1 gene is essential for tumor suppression and also likely participates in suppression of metastatic growth.