Numerous hormones and transcription factors regulate the development of the `business' end of the lungs – the alveoli, where gas exchange occurs. Now, Tenen, Kobayashi and colleagues report that coactivator-associated arginine methyltransferase (CARM1, a transcriptional coactivator that methylates histones and various transcription factors) also plays a crucial regulatory role during lung development (see p. 2147). The researchers show that alveolar type II (AT2) cells hyperproliferate in the lungs of Carm1-null (Carm1Δ/Δ) mutant mouse embryos (which fail to breathe and die shortly after birth), an unexpected result given that CARM1 knockdown inhibits the proliferation of breast cancer cell lines. Using electron microscopy, they show that the AT2 cells in the lungs of the Carm1Δ/Δ mice do not differentiate normally into alveolar type I (AT1) cells. Finally, they report that the expression of many cell-cycle genes and markers of AT1 differentiation is dysregulated in Carm1Δ/Δ embryos. Thus, the researchers conclude, CARM1 is required for the proper control of proliferation and differentiation of these pulmonary epithelial cells.