Phosphonates allow certain organisms to thrive in otherwise hostile environments, and 2-aminoethylphosphonate (AEP) is a precursor of many cellular phosphonates. AEP transaminase (AEPT) is an enzyme essential to phosphonate synthesis and degradation pathways. The crystal structure of AEP transaminase was determined by multiwavelength anomalous diffraction of 66 selenium atoms. The refined structure at 2.2 A resolution revealed an overall fold and active site location similar to those of the dimeric, two-domain structure of type I aminotransferases. The active site contains a cofactor, pyridoxal 5'-phosphate (PLP), and the product phosphonoacetaldehyde. Comparison with other type I aminotransferase structures shows that the PLP-protein interactions are conserved. Modeling of bound substrates and products reveals the structural basis for AEP recognition and the stereospecificity of proton elimination at the alpha-carbon and indicates conformational changes along the reaction pathway.