Modified pyrimidine monophosphates such as methyl dCMP (mdCMP), hydroxymethyl dUMP (hmdUMP) and hmdCMP in some phages are synthesized by a large group of enzymes termed as thymidylate synthases (TS). Thymidylate is a nucleotide required for DNA synthesis and thus TS is an important drug target. In the biosynthetic pathway of the nucleoside fungicide mildiomycin isolated from Streptomyces rimofaciens ZJU5119, a cytidylate (CMP) hydroxymethylase, MilA, catalyzes the conversion of CMP into 5'-hydroxymethyl CMP (hmCMP) with an efficiency (kcat/KM) of 5-fold faster than for deoxycytidylate (dCMP). MilA is thus the first enzyme of the TS superfamily preferring CMP to dCMP. Here, we determined the crystal structures of MilA and its complexes with various substrates including CMP, dCMP and hmCMP. Comparing these structures to those of dCMP hydroxymethylase (CH) from T4 phage and TS from Escherichia coli revealed that two residues in the active site of CH and TS, a serine and an arginine, are respectively replaced by an alanine and a lysine, Ala176 and Lys133, in MilA. Mutation of A176S/K133R of MilA resulted in a reversal of substrate preference from CMP to dCMP. This is the first study reporting the evolution of the conserved TS in substrate selection from DNA metabolism to secondary nucleoside biosynthesis.