[Fe]‐hydrogenase contains the iron‐guanylylpyridinol (FeGP) cofactor 1. The FeGP cofactor contains a pyridinol ring substituted by GMP, two methyl and an acylmethyl groups. HcgC, an enzyme of FeGP biosynthesis, catalyzes the methyl transfer from S‐adenosylmethionine (SAM) to C3 of 6‐carboxymethyl‐5‐methyl‐4‐hydroxy‐2‐pyridinol 2. Here, we report on the ternary structure of HcgC−S‐adenosylhomocysteine (SAH, the demethylated product of SAM) and 2 at 1.7 Å resolution. The proximity of C3 of 2 and S of SAH indicates a catalytically productive geometry. The hydroxy and carboxy groups of 2 are hydrogen‐bonded with I115 and T179 as well as by a series of waters linked with polar and a few protonable groups. These interactions stabilize the deprotonated state of the hydroxy groups and a keto form of 2, by which the nucleophilicity of C3 is increased by resonance effects. Complemented by mutational analysis a structure‐based catalytic mechanism was proposed.