Methylation of 3′-terminal nucleotides of miRNA/miRNA* is part of miRNAs biogenesis in plants but is not found in animals. In Arabidopsis thaliana this reaction is carried out by a multidomain AdoMet-dependent 2′-O-methyltransferase HEN1. Using deletion and structure-guided mutational analysis, we show that the double-stranded RNA-binding domains R1 and R2 of HEN1 make significant but uneven contributions to substrate RNA binding, and map residues in each domain responsible for this function. Using GST pull-down assays and yeast two-hybrid analysis we demonstrate direct HEN1 interactions, mediated by its FK506-binding protein-like domain and R2 domain, with the microRNA biogenesis protein HYL1. Furthermore, we find that HEN1 forms a complex with DICER-LIKE 1 (DCL1) ribonuclease, another key protein involved in miRNA biogenesis machinery. In contrast, no direct interaction is detectable between HEN1 and SERRATE. On the basis of these findings, we propose a mechanism of plant miRNA maturation which involves binding of the HEN1 methyltransferase to the DCL1•HYL1•miRNA complex excluding the SERRATE protein.