Penicillin acylase of Escherichia coli catalyses the hydrolysis and synthesis of beta-lactam antibiotics. To study the role of hydrophobic residues in these reactions, we have mutated three active-site phenylalanines. Mutation of alphaF146, betaF24 and betaF57 to Tyr, Trp, Ala or Leu yielded mutants that were still capable of hydrolysing the chromogenic substrate 2-nitro-5-[(phenylacetyl)amino]-benzoic acid. Mutations on positions alphaF146 and betaF24 influenced both the hydrolytic and acyl transfer activity. This caused changes in the transferase/hydrolase ratios, ranging from a 40-fold decrease for alphaF146Y and alphaF146W to a threefold increase for alphaF146L and betaF24A, using 6-aminopenicillanic acid as the nucleophile. Further analysis of the betaF24A mutant showed that it had specificity constants (kcat/Km) for p-hydroxyphenylglycine methyl ester and phenylglycine methyl ester that were similar to the wild-type values, whereas the specificity constants for p-hydroxyphenylglycine amide and phenylglycine amide had decreased 10-fold, due to a decreased kcat value. A low amidase activity was also observed for the semisynthetic penicillins amoxicillin and ampicillin and the cephalosporins cefadroxil and cephalexin, for which the kcat values were fivefold to 10-fold lower than the wild-type values. The reduced specificity for the product and the high initial transferase/hydrolase ratio of betaF24A resulted in high yields in acyl transfer reactions.