The tRNA(Gm18) methyltransferase (TrmH) catalyzes the 2'-O methylation of guanosine 18 (Gua18) of tRNA. We solved the crystal structure of Thermus thermophilus TrmH complexed with S-adenosyl-L-methionine at 1.85 A resolution. The catalytic domain contains a deep trefoil knot, which mutational analyses revealed to be crucial for the formation of the catalytic site and the cofactor binding pocket. The tRNA dihydrouridine(D)-arm can be docked onto the dimeric TrmH, so that the tRNA D-stem is clamped by the N- and C-terminal helices from one subunit while the Gua18 is modified by the other subunit. Arg41 from the other subunit enters the catalytic site and forms a hydrogen bond with a bound sulfate ion, an RNA main chain phosphate analog, thus activating its nucleophilic state. Based on Gua18 modeling onto the active site, we propose that once Gua18 binds, the phosphate group activates Arg41, which then deprotonates the 2'-OH group for methylation.