Recent structural data and the properties of several active site mutants of serine hydroxymethyltransferase have resolved some key questions concerning the catalytic mechanism and broad substrate specificity of this enzyme. In the tetrahydrofolate-dependent conversion of serine to glycine, an early proposed mechanism involved a retroaldol cleavage and a formaldehyde intermediate, while a more recent suggestion posits a direct nucleophilic displacement of the serine hydroxyl by N(5) of tetrahydrofolate, without creation of free formaldehyde. Geometric and chemical difficulties with both options led to a new proposal, a modified retroaldol mechanism in which N(5) of tetrahydrofolate makes a nucleophilic attack on serine C(3) leading to breakage of the C(3)-C(2)-bond of serine rather than the C(3)-hydroxyl bond. Molecular modeling revealed how a variety of substrates could be accommodated in the folate-independent cleavage of 3-hydroxyamino acids and shed light on the mechanism of this reaction.