Alcohol is a well‐established risk factor for hepatocellular carcinoma (HCC), but the mechanisms by which alcohol promotes liver cancer are not well understood. Studies suggest that ethanol may enhance tumor progression by increasing hepatocyte proliferation and through alcohol‐induced liver inflammation. Protein arginine methyltransferase 1 (PRMT1) is the main enzyme responsible for cellular arginine methylation. Asymmetric dimethyl arginine, produced by PRMT1, is a potent inhibitor of nitric oxide synthases. PRMT1 is implicated in the development of several types of tumors and cardiovascular disease. Our previous work has shown that PRMT1 in the liver regulates hepatocyte proliferation and oxidative stress and protects from alcohol‐induced liver injury. However, its role in HCC development remains controversial. In this study, we found that hepatocyte‐specific PRMT1‐knockout mice develop an increased number of tumors in an N‐nitrosodiethylamine (DEN) alcohol model of liver tumorigenesis in mice. This effect was specific to the alcohol‐related component because wild‐type and knockout mice developed similar tumor numbers in the DEN model without the addition of alcohol. We found that in the presence of alcohol, the increase in tumor number was associated with increased proliferation in liver and tumor, increased WNT/β‐catenin signaling, and increased inflammation. We hypothesized that increased inflammation was due to increased oxidative and nitrosative stress in knockout mice. By blocking excess nitric oxide production using an inducible nitric oxide synthase inhibitor, we reduced hepatocyte death and inflammation in the liver and prevented the increase in WNT/β‐catenin signaling, proliferation, and tumor number in livers of knockout mice. Conclusion: PRMT1 is an important protection factor from alcohol‐induced liver injury, inflammation, and HCC development.