Biological roles for UFM1, a ubiquitin-like protein, are largely unknown, and therefore we screened for targets of ufmylation. Here we show that ufmylation of the nuclear receptor coactivator ASC1 is a key step for ERα transactivation in response to 17β-estradiol (E₂). In the absence of E₂, the UFM1-specific protease UfSP2 was bound to ASC1, which maintains ASC1 in a nonufmylated state. In the presence of E₂, ERα bound ASC1 and displaced UfSP2, leading to ASC1 ufmylation. Polyufmylation of ASC1 enhanced association of p300, SRC1, and ASC1 at promoters of ERα target genes. ASC1 overexpression or UfSP2 knockdown promoted ERα-mediated tumor formation in vivo, which could be abrogated by treatment with the anti-breast cancer drug tamoxifen. In contrast, expression of ufmylation-deficient ASC1 mutant or knockdown of the UFM1-activating E1 enzyme UBA5 prevented tumor growth. These findings establish a role for ASC1 ufmylation in breast cancer development by promoting ERα transactivation.