An iterative, computer-assisted, drug design strategy that combines molecular design, molecular mechanics, molecular dynamics (MD), and free energy perturbation (FEP) calculations with compound synthesis, biochemical testing of inhibitors, and crystallographic structure determination of protein-inhibitor complexes was successfully used to predict thr rank order of a series of nucleoside monophosphate analogues as fructose 1,6-bisphosphatase (FBPase) inhibitors. The X-ray structure of FBPase complexed with 5-aminoimidazole-4-carboxamide-1-beta -D-ribofuranosyl 5'-monophosphate (ZMP) provided structural information used for subsequent analogue design and free energy calculations. The FEP protocol was validated by calculating the free energy differences for the mutation of ZMP (1) to AMP (2). The calculated results showed a net gain of 1.7 kcal/mol, which agreed with the experimental result of 1.3 kcal/mol. FEP calculations were performed for 18 other AMP analogues. Inhibition constants were determined for over half of these analogues, usually after completion of the calculation, and were consistent with the predictions. Solvation free energy differences between AMP and various AMP analogues proved to be an important factor in binding free energies, suggesting that increased desolvation costs associated with the addition of polar groups to an inhibitor must be overcome by stronger ligand-protein interactions if the structural modification is to enhance inhibitor potency. The results indicate that FEP calculations predict relative binding affinities with high accuracy and provide valuable insight into the factors that influence inhibitor binding and therefore should greatly aid efforts to optimize initial lead compounds and reduce the time required for the discovery of new drug candidates.