The crystal structure of the hammerhead ribozyme bound to the pentavalent transition state analogue vanadate reveals significant rearrangements relative to the previously determined structures. The active site contracts, bringing G10.1 closer to the cleavage site and repositioning a divalent metal ion such that it could, ultimately, interact directly with the scissile phosphate. This ion could also position a water molecule to serve as a general acid in the cleavage reaction. A second divalent ion is observed coordinated to O6 of G12. This metal ion is well-placed to help tune the pKA of G12. On the basis of this crystal structure as well as a wealth of biochemical studies, we propose a mechanism in which G12 serves as the general base and a magnesium-bound water serves as a general acid.