Brown adipose tissue (BAT) dissipates chemical energy in the form of heat as a defence against hypothermia and obesity. Current evidence indicates that brown adipocytes arise from Myf5(+) dermotomal precursors through the action of PR domain containing protein 16 (PRDM16) transcriptional complex(1,2). However, the enzymatic component of the molecular switch that determines lineage specification of brown adipocytes remains unknown. Here we show that euchromatic histone-lysine N-methyltransferase 1 (EHMT1) is an essential BAT-enriched lysine methyltransferase in the PRDM16 transcriptional complex and controls brown adipose cell fate. Loss of EHMT1 in brown adipocytes causes a severe loss of brown fat characteristics and induces muscle differentiation in vivo through demethylation of histone 3 lysine 9 (H3K9me2 and 3) of the muscle-selective gene promoters. Conversely, EHMT1 expression positively regulates the BAT-selective thermogenic program by stabilizing the PRDM16 protein. Notably, adipose-specific deletion of EHMT1 leads to a marked reduction of BAT-mediated adaptive thermogenesis, obesity and systemic insulin resistance. These data indicate that EHMT1 is an essential enzymatic switch that controls brown adipose cell fate and energy homeostasis.