Estrogen receptor (ER) signaling plays a pivotal role in many developmental processes and has been implicated in numerous diseases including cancers. We recently showed that direct ERα methylation by the multi-specificity histone lysine methyltransferase SMYD2 regulates estrogen signaling through repressing ERα-dependent transactivation. However, the mechanism controlling the specificity of the SMYD2-ERα interaction and the structural basis of SMYD2 substrate binding diversity are unknown. Here we present the crystal structure of SMYD2 in complex with a target lysine (Lys266)-containing ERα peptide. The structure reveals that ERα binds SMYD2 in a U-shaped conformation with the binding specificity determined mainly by residues C-terminal to the target lysine. The structure also reveals numerous intrapeptide contacts that ensure shape complementarity between the substrate and the active site of the enzyme, thereby likely serving as an additional structural determinant of substrate specificity. In addition, comparison of the SMYD2-ERα and SMYD2-p53 structures provides the first structural insight into the diverse nature of SMYD2 substrate recognition and suggests that the broad specificity of SMYD2 is achieved by multiple molecular mechanisms such as distinct peptide binding modes and the intrinsic dynamics of peptide ligands. Strikingly, a novel potentially SMYD2-specific polyethylene glycol binding site is identified in the CTD domain, implicating possible functions in extended substrate binding or protein-protein interactions. Our study thus provides the structural basis for the SMYD2-mediated ERα methylation, and the resulting knowledge of SMYD2 substrate specificity and target binding diversity could have important implications in selective drug design against a wide range of ERα-related diseases.