beta-Lactamases are the primary cause of beta-lactam antibiotic resistance in many pathogenic organisms. The beta-lactamase catalytic mechanism has been shown to involve a covalent acyl-enzyme. Examination of the structure of the class A beta-lactamase from Bacillus licheniformis suggested that replacement of Asn-170 by leucine would disrupt the deacylation reaction by displacing the hydrolytic water molecule. When N170L beta-lactamase was reacted with penicillins, a novel product was formed. We postulate that with leucine at position 170 the acyl-enzyme undergoes deacylation by an intramolecular rearrangement (rather than hydrolysis) to form a thiazolidine-oxazolinone as the initial product. The oxazolinone subsequently undergoes rapid breakdown leading to the formation of N-phenylacetylglycine and N-formylpenicillamine. This appears to be the first reported case where a point mutation leads to a change in enzyme mechanism resulting in a substantially altered product, effectively changing the product specificity of beta-lactamase into that of D-Ala-D-Ala-carboxypeptidase interacting with benzylpenicillin.