Porcine pepsin proteolysis of the hexapeptide Leu-Ser-p-nitro-Phe-Nle-Ala-Leu-OMe (where OMe = methoxy and Nle = norleucine) in the presence of dipeptide Leu-Leu synthesizes a new hexapeptide Leu-Ser-p-nitro-Phe-Leu-Leu. Contrary to transpeptidation kinetics of other proteases, which depend upon an acyl-enzyme intermediate, the time course for pepsin-catalyzed transpeptidation displays a distinct lag before reaching a steady-state reaction velocity. Moreover, this lag is coupled to burst kinetics for the formation of proteolytic products, Leu-Ser-p-nitro-Phe and Nle-Ala-Leu-OMe. The lag requires that free Leu-Ser-p-nitro-Phe accumulate in the reaction medium during the lag phase and subsequently rebind for transpeptidation. Consistent with this dissociative kinetic mechanism are normal solvent isotope effects on formation of the proteolytic products Leu-Ser-p-nitro-Phe (vH/vD = 2.2 +/- 0.2) and Nle-Ala-Leu-OMe (vH/vD = 1.8 +/- 0.1) as opposed to an inverse effect on the formation of the transpeptidation product Leu-Ser-p-nitro-Phe-Leu-Leu (vH/vD = 0.40 +/- 0.09). Because proteolysis is slower in D2O but transpeptidation is faster, the isotopically sensitive step must occur after release of both products of proteolysis, which precludes putative acyl-enzyme covalent intermediates. Isotopically enhanced transpeptidation is a new type of isotope effect but one that is consistent with the Uni Bi iso-mechanism previously postulated on the basis of solvent isotope effects on Vmax but not on Vmax/Km (Rebholz, K. L., and Northrop, D. B. (1991) Biochem. Biophys Res. Commun. 179, 65-69) and confirmed by solvent isotope effects on the onset of inhibition by pepstatin (Cho, Y.-K., Rebholz, K. L., and Northrop, D. B. (1994) Biochemistry 33, 9637-9642). As a new biochemical mechanism for peptide bond synthesis that has a potential for applications in biotechnology, it is here proposed that the energy necessary to drive peptide synthesis from free peptides comes from the sizable free energy drop associated with rehydration of the active site of pepsin in 55 M water.