Notoginsenosides are important bioactive compounds from Panax notoginseng (Burk.) F. H. Chen, most of which have xylose in their sugar chains. However, the xylosyltransferases involved in the generation of notoginsenosides remain poorly understood, posing a bottleneck for further study of the biosynthesis of notoginsenosides. In this work, a new xylosyltransferase gene, PnUGT57 (named UGT94BW1), was identified from P. notoginseng, which has a distinct sequence and could catalyze the 2'-O glycosylation of ginsenosides Rh1 and Rg1 to produce notoginsenosides R2 and R1, respectively. We first characterized the optimal conditions for the PnUGT57 activity and its enzymatic kinetic parameters, and then, molecular docking and site-directed mutagenesis were performed to elucidate the catalytic mechanism of PnUGT57. Combined with the results of site-directed mutagenesis, Glu26, Ser266, Glu267, Trp347, Ser348, and Glu352 in PnUGT57 were identified as the key residues involved in 2'-O glycosylation of C-6 O-Glc, and PnUGT57R175A and PnUGT57G237A could significantly improve the catalytic activity of PnUGT57. These findings not only provide a new xylosyltransferase gene for augmenting the plant xylosyltransferase database but also identify the pivotal sites and catalytic mechanism of the enzyme, which would provide reference for the modification and application of xylosyltransferases in the future.