Abstract Grapevine fanleaf virus (GFLV) is a picorna-like plant virus transmitted by nematodes that affects vineyards worldwide. Nanobody (Nb)-mediated resistance against GFLV has been created recently and shown to be highly effective in plants including grapevine, but the underlying mechanism is unknown. Here we present the high-resolution cryo-EM structure of the GFLV-Nb23 complex which provides the basis for the molecular recognition by the nanobody. The structure reveals a composite binding site bridging over 3 domains of the capsid protein (CP) monomer. The structure provides a precise mapping of the Nb23 epitope on the GFLV capsid in which the antigen loop is accommodated through an induced fit mechanism. Moreover, we uncover and characterize several resistance-breaking GFLV isolates with amino acids mapping within this epitope, including C-terminal extensions of the CP, which would sterically interfere with Nb binding. Escape variants with such extended CP fail to be transmitted by nematodes linking Nb-mediated resistance to vector transmission. Together, these data provide insights into the molecular mechanism of Nb23-mediated recognition of GFLV and of virus resistance loss. Significance Grapevine fanleaf virus (GFLV) is a picorna-like plant virus that severely impacts vineyards worldwide. While Nanobodies (Nb) confer resistance to GFLV in plants the underlying molecular mechanism of action is unknown. Here we present the high-resolution cryo-EM structure of the GFLV-Nb complex. It uncovers the conformational epitope on the capsid surface which is a composite binding site into which the antigen loop is accommodated through an induced fit mechanism. Furthermore, we describe several resistance-breaking isolates of GFLV with reduced Nb binding capacity. Those that carry a C-terminal extension also fail to be transmitted by nematodes. Together, these data provide structure-function insights into the Nb-GFLV recognition and the molecular mechanism leading to loss of resistance.