Establishing the mechanism of magnetic-to-particle energy conversion through magnetic reconnection in current sheets1 is the key to understanding the impact of fast release of magnetic energy in many space and astrophysical plasma systems, such as during magnetospheric substorms2,3. It is generally believed that an electron-scale diffusion region (EDR), where a magnetic-to-electron energy conversion occurs, has an X-type magnetic-field geometry4 around which the energy of anti-parallel magnetic fields injected is mostly converted to the bulk-flow energy of electrons by magnetic tension of reconnected field-lines5,6. However, it is at present unknown exactly how this energy conversion occurs in EDRs, because there has been no observational method to fully address this problem. Here we present state-of-the-art analysis of multi-spacecraft observations in Earth’s magnetotail of an electron-scale current sheet, which demonstrates that contrary to the standard model of reconnection with an X-type EDR geometry, the fast energy conversion in the detected EDR was caused mostly by magnetic-field annihilation, rather than reconnection. Furthermore, we detected a magnetic island forming in the EDR itself, implying that the EDR had an elongated shape ideal for island generation7 and magnetic-field annihilation. The experimental discovery of the annihilation-dominated EDR reveals a new form of energy conversion in the reconnection process that can occur when the EDR has evolved from the X-type to planar geometry.