The farnesoid X receptor (FXR) is a ligand (bile acid)-dependent nuclear receptor that regulates target genes involved in every aspect of bile acid homeostasis. Upon binding of ligand, FXR recruits an array of coactivators and associated proteins, some of which have intrinsic enzymatic activity that modify histones or even components of the transcriptional complex. In this study, we show chromatin occupancy by the Set7/9 methyltransferase at the FXR response element (FXRE) and direct methylation of FXR in vivo and in vitro at lysine 206. siRNA depletion of Set7/9 in the Huh-7 liver cell line decreased endogenous mRNAs of the FXR target genes, the short heterodimer partner (SHP) and bile salt export pump (BSEP). Mutation of the methylation site at K206 of FXR to an arginine prevented methylation by Set7/9. A pan-methyllysine antibody recognized the wild-type FXR but not the K206R mutant form. An electromobility shift assay showed that methylation by Set7/9 enhanced binding of FXR/retinoic X receptor-α to the FXRE. Interaction between hinge domain of FXR (containing K206) and Set7/9 was confirmed by coimmunoprecipitation, GST pull down, and mammalian two-hybrid experiments. Set7/9 overexpression in Huh-7 cells significantly enhanced transactivation of the SHP and BSEP promoters in a ligand-dependent fashion by wild-type FXR but not the K206R mutant FXR. A Set7/9 mutant deficient in methyltransferase activity was also not effective in increasing transactivation of the BSEP promoter. These studies demonstrate that posttranslational methylation of FXR by Set7/9 contributes to the transcriptional activation of FXR-target genes.