Recent studies suggest that the microprocessor (Drosha-DGCR8) complex can be recruited to chromatin to catalyze co-transcriptional processing of primary microRNAs (pri-miRNAs) in mammalian cells. However, the molecular mechanism of co-transcriptional miRNA processing is poorly understood. Here we find that HP1BP3, a histone H1-like chromatin protein, specifically associates with the microprocessor and promotes global miRNA biogenesis in human cells. Chromatin immunoprecipitation (ChIP) studies reveal genome-wide co-localization of HP1BP3 and Drosha and HP1BP3-dependent Drosha binding to actively transcribed miRNA loci. Moreover, HP1BP3 specifically binds endogenous pri-miRNAs and facilitates the Drosha/pri-miRNA association in vivo. Knockdown of HP1BP3 compromises pri-miRNA processing by causing premature release of pri-miRNAs from the chromatin. Taken together, these studies suggest that HP1BP3 promotes co-transcriptional miRNA processing via chromatin retention of nascent pri-miRNA transcripts. This work significantly expands the functional repertoire of the H1 family of proteins and suggests the existence of chromatin retention factors for widespread co-transcriptional miRNA processing.