The brown midrib2 (bm2) mutant of maize, which has a modified lignin composition, contains a mutation in the methylenetetrahydrofolate reductase (MTHFR) gene. Here, we show that a MITE transposon insertion caused down-regulation of MTHFR, with an accompanying decrease in 5-methyl-tetrahydrofolate and an increase in 5, 10-methylene-tetrahydrofolate and tetrahydrofolate in the bm2 mutant. Furthermore, MTHFR mutation did not change the content of S-adenosyl methionine (SAM), the methyl group donor involved in the biosynthesis of guaiacyl and syringyl lignins, but increased the level of S-adenosyl homocysteine (SAH), the demethylation product of SAM. Moreover, competitive inhibition of the maize caffeoyl CoA O-methyltransferase (CCoAOMT) and caffeic acid O-methyltransferase (COMT) enzyme activities by SAH was found, suggesting that the SAH/SAM ratio, rather than the concentration of SAM, regulates the transmethylation reactions of lignin intermediates. Phenolic profiling revealed that caffeoyl alcohol glucose derivatives accumulated in the bm2 mutant, indicating impaired 3-O-methylation of monolignols. A remarkable increase in the unusual catechyl lignin in the mutant demonstrates that MTHFR down-regulation mainly affects guaiacyl lignin biosynthesis, consistent with the observation that CCoAOMT is more sensitive to SAH inhibition than COMT. This study uncovered a novel regulatory mechanism in lignin biosynthesis, which may offer an effective approach to utilizing lignocellulosic feedstocks in the future.