Dipeptidyl peptidase-IV (DPP-IV) is a serine protease with a signature Asp-His-Ser motif at the active site. Our pH data suggest that Gly-Pro-pNA cleavage catalyzed by DPP-IV is facilitated by an ionization of a residue with a pK of 7.2 +/- 0.1. By analogy to other serine proteases this pK is suggestive of His-Asp assisted Ser addition to the P1 carbonyl carbon of the substrate to form a tetrahedral intermediate. Solvent kinetic isotope effect studies yielded a D2Okcat/Km=2.9+/-0.2 and a D2Okcat=1.7+/-0.2 suggesting that kinetically significant proton transfers contribute to rate limitation during acyl intermediate formation (leaving group release) and hydrolysis. A "burst" of product release during pre steady-state Gly-Pro-pNA cleavage indicated rate limitation in the deacylation half-reaction. Nevertheless, the amplitude of the burst exceeded the enzyme concentration significantly (approximately 15-fold), which is consistent with a branching deacylation step. All of these data allowed us to better understand DPP-IV inhibition by saxagliptin (BMS-477118). We propose a two-step inhibition mechanism wherein an initial encounter complex is followed by covalent intermediate formation. Final inhibitory complex assembly (kon) depends upon the ionization of an enzyme residue with a pK of 6.2 +/- 0.1, and we assigned it to the catalytic His-Asp pair which enhances Ser nucleophilicity for covalent addition. An ionization with a pK of 7.9 +/- 0.2 likely reflects the P2 terminal amine of the inhibitor hydrogen bonding to Glu205/Glu206 in the enzyme active site. The formation of the covalent enzyme-inhibitor complex was reversible and dissociated with a koff of (5.5 +/- 0.4) x 10(-5) s(-1), thus yielding a Ki* (as koff/kon) of 0.35 nM, which is in good agreement with the value of 0.6 nM obtained from steady-state inhibition studies. Proton NMR spectra of DPP-IV showed a downfield resonance at 16.1 ppm. Two additional peaks in the 1H NMR spectra at 17.4 and 14.1 ppm were observed upon mixing the enzyme with saxagliptin. Fractionation factors (phi) of 0.6 and 0.5 for the 17.4 and 14.1 ppm peaks, respectively, are suggestive of short strong hydrogen bonds in the enzyme-inhibitor complex.