Plastics, including poly(ethylene terephthalate) (PET), possess many desirable characteristics and thus are widely used in daily life. However, non-biodegradability, once thought to be an advantage offered by plastics, is causing major environmental problem. Recently, a PET-degrading bacterium, Ideonella sakaiensis, was identified and suggested for possible use in degradation and/or recycling of PET. However, the molecular mechanism of PET degradation is not known. Here we report the crystal structure of I. sakaiensis PETase (IsPETase) at 1.5 Å resolution. IsPETase has a Ser-His-Asp catalytic triad at its active site and contains an optimal substrate binding site to accommodate four monohydroxyethyl terephthalate (MHET) moieties of PET. Based on structural and site-directed mutagenesis experiments, the detailed process of PET degradation into MHET, terephthalic acid, and ethylene glycol is suggested. Moreover, other PETase candidates potentially having high PET-degrading activities are suggested based on phylogenetic tree analysis of 69 PETase-like proteins.