Crystallographic analysis and site-directed mutagenesis have been used to identify the catalytic and oligosaccharide recognition residues of peptide-N4-(N-acetyl-beta-D-glucosaminyl)asparagine amidase F (PNGase F), an amidohydrolase that removes intact asparagine-linked oligosaccharide chains from glycoproteins and glycopeptides. Mutagenesis has shown that three acidic residues, Asp-60, Glu-206, and Glu-118, that are located in a cleft at the interface between the two domains of the protein are essential for activity. The D60N mutant has no detectable activity, while E206Q and E118Q have less than 0.01 and 0.1% of the wild-type activity, respectively. Crystallographic analysis, at 2.0-A resolution, of the complex of the wild-type enzyme with the product, N,N'-diacetylchitobiose, shows that Asp-60 is in direct contact with the substrate at the cleavage site, while Glu-206 makes contact through a bridging water molecule. This indicates that Asp-60 is the primary catalytic residue, while Glu-206 probably is important for stabilization of reaction intermediates. Glu-118 forms a hydrogen bond with O6 of the second N-acetylglucosamine residue of the substrate and the low activity of the E118Q mutant results from its reduced ability to bind the oligosaccharide. This analysis also suggests that the mechanism of action of PNGase F differs from those of L-asparaginase and glycosylasparaginase, which involve a threonine residue as the nucleophile.