Centromeres of eukaryotic chromosomes mark the site for kinetochore formation and microtubule attachment and are essential for accurate chromosome segregation. Although centromere identity is defined by the presence of the histone H3 variant CenH3/centromere protein A (CENP-A), little is known about how epigenetic modifications on CenH3 might regulate kinetochore assembly and centromere function. Here we show that CENP-A from Saccharomyces cerevisiae, termed Cse4, is methylated on arginine 37 (R37) and that this methylation regulates the recruitment of kinetochore components to centromeric sequences. The absence of Cse4 R37 methylation caused a growth defect in cells lacking the centromere binding factor Cbf1 and synthetic lethality when combined with mutations in components of the Ctf19 linker complex that connects the inner kinetochore to microtubule-binding proteins. The cells showed a cell-cycle arrest in G2/M phase and defects in plasmid and chromosome segregation. Furthermore, the levels of Mtw1/MIND (Mtw1 including Nnf1-Nsl1-Dsn1) and Ctf19 components at the centromere, but not of Cse4 itself, were reduced in the absence of Cse4 R37 methylation, thus showing that this modification regulates the recruitment of linker components to the centromere. Altogether, our data identify a unique regulatory principle on centromeric chromatin by posttranslational modification of the amino terminus of CenH3.