L-carnosine is a bioactive dipeptide (beta-alanyl-L-histidine) present in mammalian tissues, including the central nervous system, and has potential neuroprotective and neurotransmitter functions. In mammals, two types of L-carnosine-hydrolyzing enzymes (CN1 and CN2) have been cloned thus far, and they have been classified as metallopeptidases of the M20 family. The enzymatic activity of CN2 requires Mn(2+), and CN2 is inhibited by a nonhydrolyzable substrate analog, bestatin. Here, we present the crystal structures of mouse CN2 complexed with bestatin together with Zn(2+) at a resolution of 1.7 A and that with Mn(2+) at 2.3 A CN2 is a homodimer in a noncrystallographic asymmetric unit, and the Mn(2+) and Zn(2+) complexes closely resemble each other in the overall structure. Each subunit is composed of two domains: domain A, which is complexed with bestatin and two metal ions, and domain B, which provides the major interface for dimer formation. The bestatin molecule bound to domain A interacts with several residues of domain B of the other subunit, and these interactions are likely to be essential for enzyme activity. Since the bestatin molecule is not accessible to the bulk water, substrate binding would require conformational flexibility between domains A and B. The active site structure and substrate-binding model provide a structural basis for the enzymatic activity and substrate specificity of CN2 and related enzymes.