The ␣-amino acid ester hydrolase (AEH) from Acetobacter turbidans is a bacterial enzyme catalyzing the hydrolysis and synthesis of -lactam antibiotics. The crystal structures of the native enzyme, both unliganded and in complex with the hydrolysis product D-phenylglycine are reported, as well as the structures of an inactive mutant (S205A) complexed with the substrate ampicillin, and an active site mutant (Y206A) with an increased tendency to catalyze antibiotic production rather than hydrolysis. The structure of the native enzyme shows an acyl binding pocket, in which D-phenylglycine binds, and an additional space that is large enough to accommodate the -lactam moiety of an antibiotic. In the S205A mutant, ampicillin binds in this pocket in a non-productive manner, making extensive contacts with the side chain of Tyr 112 , which also participates in oxyanion hole formation. In the Y206A mutant, the Tyr 112 side chain has moved with its hydroxyl group toward the catalytic serine. Because this changes the properties of the -lactam binding site, this could explain the increased -lactam transferase activity of this mutant.Thirty years ago, several bacterial strains, such as Acetobacter turbidans and Xanthomonas citri, were identified that were able to efficiently produce semi-synthetic -lactam antibiotics from -lactam nuclei produced by fermentation, and synthetic acyl compounds with an ␣-amino group (1). Important antibiotics with such acyl chains include cephalexin, cephadroxil, ampicillin, and amoxicillin. Given the difficulties in preparing such antibiotics by chemical means (2), much effort has been put into harnessing the -lactam antibiotic synthesizing activity of these bacteria for application in the industrial production of antibiotics. It appeared that this activity originated from enzymes preferentially hydrolyzing esters of ␣-amino acids, the ␣-amino acid ester hydrolases (AEHs) 2 (3). Because of its potential usefulness in antibiotic synthesis, the AEH from A. turbidans has been studied extensively, and it was the first of its family for which the gene was cloned and overexpressed (4). The sequence showed a GXSYXG active site motif (4), which is characteristic of serine hydrolases of the X-prolyl dipeptidyl aminopeptidase family (5). Labeling studies with a suicide inhibitor, sequence alignments, and site-directed mutagenesis identified a catalytic triad of Ser 205 , Asp 338 , and His 370 in what was proposed to be a catalytic domain with an ␣/-hydrolase fold (6).Recently, the crystal structure of the X. citri AEH was solved (7). This enzyme shares 63% sequence identity with the A. turbidans AEH. The structure showed a tetrameric arrangement of monomers consisting of three domains each: an ␣/-hydrolase domain at the N terminus, a helical cap domain, and a C-terminal jellyroll fold domain. The active site indeed contained a Ser-His-Asp catalytic triad, the constituents of which were found in their canonical positions in the ␣/-hydrolase domain. Furthermore, a putative oxyanion hole was found i...