Prolyl oligopeptidase, an enzyme implicated in memory disorders, is a member of a new serine peptidase family. Crystallographic studies (Fülöp et al., 1998) revealed a novel oxyanion binding site containing a tyrosine residue, Tyr473. To study the importance of Tyr473 OH, we have produced prolyl oligopeptidase and its Tyr473Phe variant in Escherichia coli. The specificity rate constant, kcat/Km, for the modified enzyme decreased by a factor of 8–40 with highly specific substrates, Z-Gly-Pro-Nap, and a fluorogenic octapeptide. With these compounds, the decline in kcat was partly compensated for by reduction in Km, a difference from the extensively studied subtilisin. With the less specific suc-Gly-Pro-Nap, the Km value, which approximates Ks, was not significantly changed, resulting in greater diminution (∼500-fold) in kcat/Km. The second-order rate constant for the reaction with Z-Pro-prolinal, a slow tight-binding transition-state analogue inhibitor, and the Ki values for a slow substrate and two product-like inhibitors were not significantly affected by the Tyr473 OH group. The mechanism of transition-state stabilization was markedly dependent upon the nature of substrate and varied with pH as the enzyme interconverted between its two catalytically competent forms.