SET domain lysine methyltransferases are known to catalyze site and state-specific methylation of lysine residues in histones that is fundamental in epigenetic regulation of gene activation and silencing in eukaryotic organisms. Here we report the three-dimensional solution structure of the SET domain histone lysine methyltransferase (vSET) from Paramecium bursaria chlorella virus 1 bound to cofactor S-adenosyl-L-homocysteine and a histone H3 peptide containing mono-methylated lysine 27. The dimeric structure, mimicking an enzyme/cofactor/substrate complex, yields the structural basis of the substrate specificity and methylation multiplicity of the enzyme. Our results from mutagenesis and enzyme kinetics analyses argue that a general base mechanism is less likely for lysine methylation by SET domains; and that the only invariant active site residue tyrosine 105 in vSET facilitates methyl transfer from cofactor to the substrate lysine by aligning intermolecular interactions in the lysine access channel of the enzyme.