Hydrogenases are promising templates for constructing new H-2-based catalysts. [Fe]-hydrogenase, which features an ironguanylylpyridinol (FeGP) cofactor, catalyses a reversible hydride transfer from H-2 to methenyl-tetrahydromethanopterin (methenyl-H4MPT+, a C-1 carrier in methanogens). Here, we present a detailed mechanistic scenario of this reaction based on the 1.06 angstrom resolution structure of [Fe]-hydrogenase in a closed active form, in which the Fe of the FeGP cofactor is positioned near the hydride-accepting C14a of a remarkably distorted methenyl-H4MPT+. The open-to-closed transition generates an unsaturated pentacoordinated Fe on expulsion of a water ligand. Quantum mechanics/molecular mechanics computations based on experimental models indicate that a deprotonated 2-OH group on the FeGP cofactor acts as a catalytic base and provides a fairly complete picture of H-2 activation: H-2 binding on the empty Fe site was found to be nearly thermo-neutral while H-2 cleavage and hydride transfer proceed smoothly. The overall reaction involves a repositioning and relaxation of the distorted methenyl-H4MPT+.