Ectoine synthase (EctC) is the signature enzyme for the production of ectoine, a compatible solute and chemical chaperone widely synthesized by bacteria as a cellular defense against the detrimental effects of osmotic stress. EctC catalyzes the last step in ectoine synthesis through cyclo-condensation of the EctA-formed substrate N-gamma-acetyl-L-2,4-diaminobutyric acid via a water elimination reaction. We have biochemically and structurally characterized the EctC enzyme from the thermo-tolerant bacterium Paenibacillus lautus (Pl). EctC is a member of the cupin superfamily and forms dimers, both in solution and in crystals. We obtained high-resolution crystal structures of the (Pl)EctC protein in forms that contain (i) the catalytically important iron, (ii) iron and the substrate N-gamma-acetyl-L-2,4-diaminobutyric acid, and (iii) iron and the enzyme reaction product ectoine. These crystal structures lay the framework for a proposal for the EctC-mediated water-elimination reaction mechanism. Residues involved in coordinating the metal, the substrate, or the product within the active site of ectoine synthase are highly conserved among a large group of EctC-type proteins. Collectively, the biochemical, mutational, and structural data reported here yielded detailed insight into the structure-function relationship of the (Pl)EctC enzyme and are relevant for a deeper understanding of the ectoine synthase family as a whole.