Biosynthesis of certain fungal polyketide-peptide synthetases involves C-methyltransferase activity that adds one or more S-adenosyl-l-methionine-derived methyl groups to the carbon framework. The previously reported PsoF-MT, the stand-alone C-methyltransferase (MT) from the pseurotin biosynthetic pathway that exists as a domain within a trifunctional didomain enzyme PsoF, was characterized crystallographically and kinetically using mutants with substrate analogs to understand how a trans-acting C-MT works and compare it to known polyketide synthase-associated C-MTs. This study identified key active-site residues involved in catalysis and substrate recognition, which led us to propose the mechanism of C-methylation and substrate specificity determinants in PsoF-MT.