DPP-IV is a prolyl dipeptidase, cleaving the peptide bond after the penultimate proline residue. It is an important drug target for the treatment of type II diabetes. DPP-IV is active as a dimer, and monomeric DPP-IV has been speculated to be inactive. In this study, we have identified the C-terminal loop of DPP-IV, highly conserved among prolyl dipeptidases, as essential for dimer formation and optimal catalysis. The conserved residue His750 on the loop contributes significantly for dimer stability. We have determined the quaternary structures of the wild type, H750A, and H750E mutant enzymes by several independent methods including chemical cross-linking, gel electrophoresis, size exclusion chromatography, and analytical ultracentrifugation. Wild-type DPP-IV exists as dimers both in the intact cell and in vitro after purification from human semen or insect cells. The H750A mutation results in a mixture of DPP-IV dimer and monomer. H750A dimer has the same kinetic constants as those of the wild type, whereas the H750A monomer has a 60-fold decrease in kcat. Replacement of His750 with a negatively charged Glu (H750E) results in nearly exclusive monomers with a 300-fold decrease in catalytic activity. Interestingly, there is no dynamic equilibrium between the dimer and the monomer for all forms of DPP-IVs studied here. This is the first study of the function of the C-terminal loop as well as monomeric mutant DPP-IVs with respect to their enzymatic activities. The study has important implications for the discovery of drugs targeted to the dimer interface.