The beta-lactam antibiotics act through their inhibition of D-alanyl-D-alanine transpeptidases (DD-peptidases) that catalyze the last step of bacterial cell wall synthesis. Bacteria resist beta-lactams by a number of mechanisms, one of the more important of which is the production of beta-lactamases, enzymes that catalyze the hydrolysis of these antibiotics. The serine beta-lactamases are evolutionary descendants of DD-peptidases and retain much of their structure, particularly at the active site. Functionally, beta-lactamases differ from DD-peptidases in being able to catalyze hydrolysis of acyl-enzyme intermediates derived from beta-lactams and being unable to efficiently catalyze acyl transfer reactions of D-alanyl-D-alanine terminating peptides. The class C beta-lactamase of Enterobacter cloacae P99 is closely similar in structure to the DD-peptidase of Streptomyces R61. Previous studies have demonstrated that the evolution of the beta-lactamase, presumably from an ancestral DD-peptidase similar to the R61 enzyme, included structural changes leading to rejection of the D-methyl substituent of the penultimate D-alanine residue of the DD-peptidase substrate. This seems to have been achieved by suitable placement of the side chain of Tyr 221 in the beta-lactamase. We show in this paper that mutation of this residue to Gly 221 produces an enzyme that more readily hydrolyzes and aminolyzes acyclic D-alanyl substrates than glycyl analogues, in contrast to the wild-type beta-lactamase; the mutant is therefore a more efficient DD-peptidase. Molecular modeling showed that the D-alanyl methyl group fits snugly into the space originally occupied by the Tyr 221 side chain and, in doing so, allows the bound substrate to assume a conformation similar to that on the R61 DD-peptidase, which has a hydrophobic pocket for this substituent. Another mutant of the P99 beta-lactamase, the extended spectrum GC1 enzyme, also has space available for a D-alanyl methyl group because of an extended omega loop. In this case, however, no enhancement of activity against D-alanyl substrates with respect to glycyl was observed. Accommodation of the penultimate D-alanyl methyl group is therefore necessary for efficient DD-peptidase activity, but not sufficient.