TrmE is a 50 kDa guanine nucleotide-binding protein conserved between bacteria and man. It is involved in the modification of uridine bases (U34) at the first anticodon (wobble) position of tRNAs decoding two-family box triplets. The precise role of TrmE in the modification reaction is hitherto unknown. Here, we report the X-ray structure of TrmE from Thermotoga maritima. The structure reveals a three-domain protein comprising the N-terminal alpha/beta domain, the central helical domain and the G domain, responsible for GTP binding and hydrolysis. The N-terminal domain induces dimerization and is homologous to the tetrahydrofolate-binding domain of N,N-dimethylglycine oxidase. Biochemical and structural studies show that TrmE indeed binds formyl-tetrahydrofolate. A cysteine residue, necessary for modification of U34, is located close to the C1-group donor 5-formyl-tetrahydrofolate, suggesting a direct role of TrmE in the modification analogous to DNA modification enzymes. We propose a reaction mechanism whereby TrmE actively participates in the formylation reaction of uridine and regulates the ensuing hydrogenation reaction of a Schiff's base intermediate.