The transformation of mercury (Hg) in the environment plays a vital role in the cycling of Hg and its risk to the ecosystem and human health. Of particular importance are Hg oxidation/reduction and methylation/demethylation processes driven or mediated by the dynamics of light, microorganisms, and organic carbon, among others. Advances in understanding those Hg transformation processes determine our capacity of projecting and mitigating Hg risk. Here, we provide a critical analysis of major knowledge gaps in our understanding of Hg transformation in nature, with perspectives on approaches moving forward. Our analysis focuses on Hg transformation processes in the environment, as well as emerging methodology in exploring these processes. Future avenues for improving the understanding of Hg transformation processes to protect ecosystem and human health are also explored.