Chronic obstructive pulmonary disease (COPD) is characterized by an irreversible loss of lung function and is one of the most prevalent and severe diseases world-wide. A major feature of COPD is emphysema -the progressive loss of alveolar tissue. Coactivator-associated arginine methyltransferase-1 (CARM1) regulates histone-methylation and the transcription of genes involved in senescence, proliferation and differentiation. Complete loss of CARM1 leads to disrupted differentiation and maturation of alveolar epithelial type-II cells (ATII). We thus hypothesized that CARM1 regulates the development and progression of emphysema. To address this, we investigated the contribution of CARM1 to alveolar rarefication using the mouse model of elastase-induced emphysema in vivo and siRNA-mediated knockdown in ATII-like LA4 cells in vitro. We demonstrate that emphysema progression in vivo is associated with a time-dependent down-regulation of CARM1. Importantly, elastase-treated CARM1 haploinsufficient mice show significantly increased airspace enlargement (52.5±9.6 µm vs. 38.8±5.5 µm, p<0.01) and lung compliance (2.8±0.32 µl/cmH20 vs. 2.4±0.4 µl/cmH20, p<0.04) compared with controls. The knockdown of CARM1 in LA4 cells led to decreased SIRT1 expression (0.034±0.003 vs. 0.022±0.001, p<0.05), but increased expression of p16 (0.27±0.013 vs. 0.31±0.010, p<0.5), p21 (0.81±0.088 vs. 1.28± 0.063, p<0.01) and higher beta-galactosidase-positive senescent cells (50.57%±7.36 vs. 2.21%±0.34, p<0.001), compared with scrambled siRNA. We further demonstrated that CARM1 haploinsufficiency impairs trans-differentiation and wound healing (32.18%±0.9512 vs. 8.769%±1.967, p<0.001) of alveolar epithelial cells. Overall, these results reveal a novel function of CARM1 in regulating emphysema development and premature lung aging via alveolar senescence, as well as impaired regeneration, repair and differentiation of ATII cells.