Hypermodifications near the anticodon of tRNA are fundamental for the efficiency and fidelity of protein synthesis. Dimethylallyltransferase (DMATase) catalyzes transfer of a dimethylallyl moiety from dimethylallyl pyrophosphate to N6 of A37 in certain tRNAs. Here we present the crystal structures of Saccharomyces cerevisiae DMATase-tRNA(Cys) complex in four distinct forms, which provide snapshots of the RNA modification reaction catalyzed by DMATase. The structures reveal that the enzyme recognizes the tRNA substrate through indirect sequence readout. The targeted nucleotide A37 flips out from the anticodon loop of tRNA and flips into a channel in DMATase, where it meets its reaction partner di methylallyl pyrophosphate, which enters the channel from the opposite end. Structural changes accompanying the transfer reaction taking place in the crystal result in disengagement of DMATase-tRNA interaction near the reaction center. In addition, structural comparison of DMATase in the complex with unliganded bacterial DMATase provides a molecular basis of ordered substrate binding by DMATase.