We have solved the crystal structure of an all-RNA hammerhead ribozyme by isomorphous replacement which contains a single 2'-O-methyl-cytosine at the active site to prevent cleavage. We describe the hammerhead RNA structure from a point of view which shows how the structural elements are disposed to bring the active site nucleotide into the catalytic pocket of the ribozyme. Five potential Mg(II) binding sites can be identified in the hammerhead RNA electron density maps. Of these, one is a newly identified metal site positioned near the ribozyme catalytic pocket, and another site corresponds to a Mn(II) site identified in the previous hammerhead RNA structure. We propose a mechanism for RNA catalytic cleavage on the basis of this new metal-binding site, as well as upon comparisons between the catalytic pocket of the hammerhead RNA and the metal-binding sites in the structurally homologous uridine turn of the anticodon loop in tRNAPhe.