Crystal structures of the human ADAR2 deaminase domain in complex with RNA duplexes reveal the mechanisms for ADAR2's action and explain its substrate preference. The work also provides a rationale to understand disease-related mutations. Adenosine deaminases acting on RNA (ADARs) are editing enzymes that convert adenosine to inosine in duplex RNA, a modification reaction with wide-ranging consequences in RNA function. Understanding of the ADAR reaction mechanism, the origin of editing-site selectivity, and the effect of mutations is limited by the lack of high-resolution structural data for complexes of ADARs bound to substrate RNAs. Here we describe four crystal structures of the human ADAR2 deaminase domain bound to RNA duplexes bearing a mimic of the deamination reaction intermediate. These structures, together with structure-guided mutagenesis and RNA-modification experiments, explain the basis of the ADAR deaminase domain's dsRNA specificity, its base-flipping mechanism, and its nearest-neighbor preferences. In addition, we identified an ADAR2-specific RNA-binding loop near the enzyme active site, thus rationalizing differences in selectivity observed between different ADARs. Finally, our results provide a structural framework for understanding the effects of ADAR mutations associated with human disease.