We first demonstrate that globular cluster G1 could have been formed by tidal interaction between M31 and a nucleated dwarf galaxy ( dE , N ) . Our fully self-consistent numerical simulations show that during tidal interaction between M31 and G1 ’ s progenitor dE , N with M _ { B } \sim -15 mag and its nucleus mass of \sim 10 ^ { 7 } M _ { \odot } , the dark matter and the outer stellar envelope of the dE , N are nearly completely stripped whereas the nucleus can survive the tidal stripping because of its initially compact nature . The naked nucleus ( i.e. , G1 ) has orbital properties similar to those of its progenitor dE , N . The stripped stars form a metal-poor ( [ Fe/H ] \sim -1 ) stellar halo around M31 and its structure and kinematics depend strongly on the initial orbit of G1 ’ s progenitor dE , N . We suggest that the observed large projected distance of G1 from M31 ( \sim 40 kpc ) can give some strong constraints on the central density of the dark matter halo of dE , N . We discuss these results in the context of substructures of M31 ’ s stellar halo recently revealed by Ferguson et al . ( 2002 ) .