Archaeal and eukaryotic translation elongation factor 2 contain a unique post-translationally modified histidine residue called diphthamide, which is the target of diphtheria toxin. The biosynthesis of diphthamide was proposed to involve three steps, with the first being the formation of a C-C bond between the histidine residue and the 3-amino-3-carboxypropyl group of S-adenosyl-l-methionine (SAM). However, further details of the biosynthesis remain unknown. Here we present structural and biochemical evidence showing that the first step of diphthamide biosynthesis in the archaeon Pyrococcus horikoshii uses a novel iron-sulphur-cluster enzyme, Dph2. Dph2 is a homodimer and each of its monomers can bind a [4Fe-4S] cluster. Biochemical data suggest that unlike the enzymes in the radical SAM superfamily, Dph2 does not form the canonical 5'-deoxyadenosyl radical. Instead, it breaks the C(gamma,Met)-S bond of SAM and generates a 3-amino-3-carboxypropyl radical. Our results suggest that P. horikoshii Dph2 represents a previously unknown, SAM-dependent, [4Fe-4S]-containing enzyme that catalyses unprecedented chemistry.