The presence of a cysteine residue(s) near the active site of acylpeptide hydrolase was suggested by inactivation of the enzyme with sulfhydryl-modifying agents and by the substantial protection against inactivation afforded by the competitive inhibitor acetylmethionine. 5,5'-dithiobis-(2-nitrobenzoate) titrations of the native and the denatured enzyme together with analysis for cysteic acid after performic acid oxidation showed that the enzyme contained 12 free SH groups and three disulfide bonds/monomer. Chemical modification with radiolabeled iodoacetamide led to the labeling of Cys-30 and Cys-64 suggesting that one or both of these Cys residues are close to the active site. Modification of one or both of them probably inhibits the enzyme either because of a distortion of the active site or because the adducts present a barrier to the efficient diffusion of substrates into and products out of the active site. Studies on the mechanism of action of acylpeptide hydrolase have employed p-nitrophenyl-N-propyl carbamate as a potent active site-directed inhibitor. Enzyme inactivation, which follows pseudo first-order kinetics, is diminished by the competitive inhibitor acetylmethionine. The inhibited enzyme slowly regains activity at a rate that is increased in the presence of the nucleophile hydroxylamine. A general mechanism involving an acyl-enzyme intermediate is supported by evidence for the formation of acetyl-alanyl hydroxamate during hydrolysis of acetyl-alanine p-nitroanilide in the presence of hydroxylamine. The effect on Vmax and Km during this reaction indicate that hydrolysis of the acyl-enzyme intermediate is rate-limiting.