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Peptidase‐E, a nonclassical serine peptidase, is specific for dipeptides with an N‐terminal aspartate. This stringent substrate specificity remains largely unexplained. We report an aspartate‐bound structure of peptidase‐E at 1.83 Å resolution. In contrast to previous reports, the enzyme forms a dimer, and the active site is located at the dimer interface, well shielded from the solvent. Our findings further suggest that the stringent aspartate specificity of the enzyme is due to electrostatics and molecular complementarity in the active site. The new structural information presented herein may provide insights into the role of functionally important residues in peptidase‐E. The aspartate‐bound crystal structure of a peptidase E at 1.83 Å resolutionThe enzyme is a dimer, not a monomer, and the active site is shielded by dimer organizationThe previously unexplained Arg174 interacts with the active site upon dimerizationThe stringent aspartate specificity is due to electrostatics and tight packing. [ABSTRACT FROM AUTHOR]

• First structure of a two-domain M1 peptidase lacking C-terminal domain. • Activity despite lack of domain with gating and substrate specificity roles. • Substrate-bound structure reported at 1.9 Å resolution. • Structural features enabling efficient catalysis with only two domains revealed. Zinc metallopeptidases of the M1 family (M1 peptidases) with unique metal binding motif HEXXH(X) 18 E regulate many important biological processes such as tumor growth, angiogenesis, hormone regulation, and immune cell development. Typically, these enzymes exist in three-domain [N-terminal domain (N-domain), catalytic domain, and C-terminal domain (C-domain)] or four-domain (N-domain, catalytic domain, middle domain, and C-domain) format in which N-domain and catalytic domain are more conserved. The C-domain plays important roles in substrate binding and gating. In this study we report the first structure of a two-domain (N-domain and catalytic domain) M1 peptidase at 2.05 Å resolution. Despite the lack of C-domain, the enzyme is active and prefers peptide substrates with large hydrophobic N-terminal residues. Its substrate-bound structure was determined at 1.9 Å resolution. Structural analyses supported by site directed mutagenesis and molecular dynamics simulations reveal structural features that could compensate for the lack of C-domain. A unique loop insertion (loop A) in the N-domain has important roles in gating and desolvation of active site. Three Arg residues of the catalytic domain are involved in substrate-binding roles typically played by positively charged residues of C-domain in other M1 peptidases. Further, its unique exopeptidase sequence motif, LALET, creates a more hydrophobic environment at the S1 subsite (which binds N-terminal residue of the substrate in aminopeptidases) than the more common GXMEN motif in the family. This leads to high affinity for large hydrophobic residues in the S1 subsite, which contributes towards efficient substrate binding in absence of C-domain. [ABSTRACT FROM AUTHOR]