Centromere (CEN) identity is specified epigenetically by specialized nucleosomes containing evolutionarily conserved CEN-specific histone H3 variant CENP-A (Cse4 in Saccharomyces cerevisiae, CENP-A in humans), which is essential for faithful chromosome segregation. However, the epigenetic mechanisms that regulate Cse4 function have not been fully defined. In this study, we show that cell cycle-dependent methylation of Cse4-R37 regulates kinetochore function and high-fidelity chromosome segregation. We generated a custom antibody that specifically recognizes methylated Cse4-R37 and showed that methylation of Cse4 is cell cycle regulated with maximum levels of methylated Cse4-R37 and its enrichment at the CEN chromatin occur in the mitotic cells. Methyl-mimic cse4-R37F mutant exhibits synthetic lethality with kinetochore mutants, reduced levels of CEN-associated kinetochore proteins and chromosome instability (CIN), suggesting that mimicking the methylation of Cse4-R37 throughout the cell cycle is detrimental to faithful chromosome segregation. Our results showed that SPOUT methyltransferase Upa1 contributes to methylation of Cse4-R37 and overexpression of UPA1 leads to CIN phenotype. In summary, our studies have defined a role for cell cycle-regulated methylation of Cse4 in high-fidelity chromosome segregation and highlight an important role of epigenetic modifications such as methylation of kinetochore proteins in preventing CIN, an important hallmark of human cancers.