Pz-peptidase A, from the thermophilic bacterium Geobacillus collagenovorans MO-1, hydrolyzes a synthetic peptide substrate, 4-phenylazobenzyloxycarbonyl-Pro-Leu-Gly-Pro-D-Arg (Pz-PLGPR), which contains a collagen-specific tripeptide sequence, -Gly-Pro-X-, but does not act on collagen proteins themselves. The mammalian enzyme, thimet oligopeptidase (TOP), which has comparable functions with bacterial Pz-peptidases but limited identity at the primary sequence level, has recently been subjected to x-ray crystallographic analysis; however, no crystal structure has yet been reported for complexes of TOP with substrate analogues. Here, we report crystallization of recombinant Pz-peptidase A in complex with two phosphinic peptide inhibitors (PPIs) that also function as inhibitors of TOP and determination of the crystal structure of these complexes at 1.80-2.00 Å resolution. The most striking difference between Pz-peptidase A and TOP is that there is no channel running the length of bacterial protein. Whereas the structure of TOP resembles an open bivalve, that of Pz-peptidase A is closed and globular. This suggests that collagenous peptide substrates enter the tunnel at the top gateway of the closed Pz-peptidase A molecule, and reactant peptides are released from the bottom gateway after cleavage at the active site located in the center of the tunnel. One of the two PPIs, PPI-2, which contains the collagen-specific sequence, helped to clarify the exquisite structure and reaction mechanism of Pz-peptidase A toward collagenous peptides. This study describes the mode of substrate binding and its implication for the mammalian enzymes.