That's what he wants to do.'what' what is it here in grammar?

In this sentence, 'what' is a conjunctive pronoun. The sentence may be divided into two clauses (Word groups with both a subject and verb). The first clause is "That's" or "that is", and the second is "what he wants to do." In the second clause, "what" functions as both a conjunction to join the two clauses anda relative pronoun.

Let's think of the sentence this way: That(thing) is what (the thing that)he wants to do. By adding in the implied meaning of the pronouns 'that' and 'what' we can see their relationship.