The chemical modification of tRNA bases by sulfur is crucial to tune translation and to optimize protein synthesis. In eukaryotes, the ubiquitin‐related modifier 1 (Urm1) pathway is responsible for the synthesis of 2‐thiolated wobble uridine (U34). During the key step of the modification cascade, the E1‐like activating enzyme ubiquitin‐like protein activator 4 (Uba4) first adenylates and thiocarboxylates the C‐terminus of its substrate Urm1. Subsequently, activated thiocarboxylated Urm1 (Urm1‐COSH) can serve as a sulfur donor for specific tRNA thiolases or participate in ubiquitin‐like conjugation reactions. Structural and mechanistic details of Uba4 and Urm1 have remained elusive but are key to understand the evolutionary branch point between ubiquitin‐like proteins (UBL) and sulfur‐relay systems. Here, we report the crystal structures of full‐length Uba4 and its heterodimeric complex with its substrate Urm1. We show how the two domains of Uba4 orchestrate recognition, binding, and thiocarboxylation of the C‐terminus of Urm1. Finally, we uncover how the catalytic domains of Uba4 communicate efficiently during the reaction cycle and identify a mechanism that enables Uba4 to protect itself against self‐conjugation with its own product, namely activated Urm1‐COSH. Synopsis tRNA thiolation factors Urm1‐Uba4 represent the most ancestral known ubiquitin‐like protein/E1 enzyme conjugation system, whose structural mechanisms have however remained elusive. Here, crystal structures and complementary biochemical and cellular analysis of fungal Urm1‐Uba4 show that it combines features of bacterial sulfur‐relay pathways and eukaryotic ubiquitin conjugation systems. Full‐length Uba4 represents a non‐canonical E1 with an unexpected asymmetric domain architecture. The Uba4 interdomain linker region has a critical role, and Uba4 adenylation activity is required to recruit its substrate Urm1. The Uba4‐Urm1 complex structure provides molecular insights into substrate recognition, adenylation, and thiocarboxylation. The catalytic cysteine responsible for E1 thioester formation protects Uba4 from its own product, Urm1‐COSH. The covalent E1‐UBL self‐conjugation reaction observed in vitro might represent the root of all eukaryotic E1‐E2-E3 based UBL conjugation pathways. Structural insights into the most ancestral known ubiquitin‐like protein/E1 enzyme conjugation system shows it to combine features of bacterial sulfur‐relay pathways and eukaryotic ubiquitin conjugation systems.