The CapD enzyme of Bacillus anthracis is a γ-glutamyl transpeptidase from the N-terminal nucleophile hydrolase superfamily that covalently anchors the poly-γ-D-glutamic acid (pDGA) capsule to the peptidoglycan. The capsule hinders phagocytosis of B. anthracis by host cells and is essential for virulence. The role CapD plays in capsule anchoring and remodeling makes the enzyme a promising target for anthrax medical countermeasures. Although the structure of CapD is known, and a covalent inhibitor, capsidin, has been identified, the mechanisms of CapD catalysis and inhibition are poorly understood. Here, we used a computational approach to map out the reaction steps involved in CapD catalysis and inhibition. We found that the rate-limiting step of either CapD catalysis or inhibition was a concerted asynchronous formation of the tetrahedral intermediate with a barrier of 22-23 kcal/mol. However, the mechanisms of these reactions differed for the two amides. The formation of the tetrahedral intermediate with pDGA was substrate-assisted with two proton transfers. In contrast, capsidin formed the tetrahedral intermediate in a conventional way with one proton transfer. Interestingly, capsidin coupled a conformational change in the catalytic residue of the tetrahedral intermediate to stretching of the scissile amide bond. Furthermore, capsidin took advantage of iminol-amide tautomerism of its diacetamide moiety to convert the tetrahedral intermediate to the acetylated CapD. As evidence of the promiscuous nature of CapD, the enzyme cleaved the amide bond of capsidin by attacking it on the opposite side compared to pDGA.