We report the crystal structure of release factor 2 bound to ribosome with an aminoacyl tRNA substrate analog at the ribosomal P site, at 3.1 A resolution. The structure shows that upon stop-codon recognition, the universally conserved GGQ motif packs tightly into the peptidyl transferase center. Nucleotide A2602 of 23S rRNA, implicated in peptide release, packs with the GGQ motif in release factor 2. The ribose of A76 of the peptidyl-tRNA adopts the C2'-endo conformation, and the 2' hydroxyl of A76 is within hydrogen-bond distance of the 2' hydroxyl of A2451. The structure suggests how a catalytic water can be coordinated in the peptidyl transferase center and, together with previous biochemical and computational data, suggests a model for how the ester bond between the peptidyl tRNA and the nascent peptide is hydrolyzed.