Signal peptidase, which removes signal peptides from preproteins, has a substrate specificity for small uncharged residues at -1 (P1) and small or larger aliphatic residues at the -3 (P3) position. Structures of the catalytic domain with a 5S-penem inhibitor and a lipopeptide inhibitor reveal candidate residues that make up the S1 and S3 pockets that bind the P1 and P3 specificity residues of the preprotein substrate. We have used site-directed mutagenesis, mass spectrometric analysis, and in vivo and in vitro activity assays as well as molecular modeling to examine the importance of the substrate pocket residues. Generally, we find that the S1 and S3 binding sites can tolerate changes that are expected to increase or decrease the size of the pocket without large effects on activity. One residue that contributes to the high fidelity of cleavage of signal peptidase is the Ile-144 residue. Changes of the Ile-144 residue to cysteine result in cleavage at multiple sites, as determined by mass spectrometry and Edman sequencing analysis. In addition, we find that signal peptidase is able to cleave after phenylalanine at the -1 residue in a double mutant in which both Ile-86 and Ile-144 were changed to an alanine. Also, alteration of the Ile-144 and Ile-86 residues to the corresponding residues found in the homologous Imp1 protease changes the specificity to promote cleavage following a -1 Asn residue. This work shows that Ile-144 and Ile-86 contribute to the signal peptidase substrate specificity and that Ile-144 is important for the accuracy of the cleavage reaction.