Dipeptidyl peptidase IV (DP-IV/CD26), fibroblast activation protein (FAP), DP-like 1 (DPL1), DP8, DP9, and DPL2 comprise the CD26 gene family. CD26/DP-IV has roles in liver disease, T cell costimulation, chemokine biology, type II diabetes, and tumor biology. DPIV substrates include the glucagonlike peptides, neuropeptide Y, and the chemokines CCL3, CCL5, CCL11, CCL22, and CXCL12. We have proposed that the extracellular region of CD26 is analogous to prolyl oligopeptidase in consisting of an alpha/beta hydrolase domain contributed by both N- and C-terminal portions of the polypeptide and a seven-blade beta-propeller domain. Replacing the C-terminal portion of the predicted alpha/beta hydrolase domain of CD26 (residues 501-766) with the homologous portion of DP8 or DP9 produced intact proteins. However, these chimeric proteins lacked dimerization and peptidase activity, suggesting that CD26 dimerization requires the C-terminal portion of the alpha/beta hydrolase domain. Deleting some N-terminal residues of the alpha/beta hydrolase domain of CD26 ablated peptidase activity and greatly diminished cell surface expression. Together with previous data that CD26 peptidase activity requires the C-terminal 20 residues, this suggests that peptidase activity requires the entire alpha/beta hydrolase domain. The catalytic triad of DP8 was shown to be Ser(739)-Asp (817)-His(849). Glu(259) of DP8, a residue distant from the catalytic triad yet greatly conserved in the CD26 gene family, was shown to be required for peptidase activity. These data concord with our predicted CD26 structure, indicate that biosynthesis of a functional fragment of CD26 is difficult, and confirm the functional homology of DP8 with CD26.