A new methane formation pathway, which uses methylphosphonate (MPn) as the methane precursor, has been discovered in the upper ocean. Methylphosphonate synthase (MPnS) is a key piece in this pathway to produce MPn from 2‐hydroxyethylphosphonate (2‐HEP), using an untypical 2‐His‐1‐Gln non‐heme iron architecture. Herein, the MPnS reaction mechanism was demonstrated by the density functional calculations to mainly include the substrate hydroxyl deprotonation, the formation of a MPn radical and a formate, and the hydrogen abstraction of formate by MPn radical. The second‐shell Lys28’ may serve as a proton reservoir activating 2‐HEP and regenerating the Fe site. The Fe‐bound superoxide radical is a bifunctional species to deprotonate the substrate hydroxyl and abstract the substrate methylene hydrogen. Several alternative mechanisms have been ruled out. Furthermore, the catalytic activity of MPnS was found to be inactivated/reduced by the mutation of Gln152E/Gln152H/Gln152D, rendering a significant evolutionary advantage with an uncommon 2‐His‐1‐Gln triad introduced to the ferrous coordination sphere.