Aminopeptidase from Aeromonas proteolytica (AAP) is a binuclear zinc enzyme that catalyzes the cleavage of the N-terminal amino acid residue of peptides and proteins. In this study, we used density functional methods to investigate the reaction mechanism of this enzyme. A model of the active site was constructed on the basis of the X-ray crystal structure of the native enzyme, and a model dipeptide was used as a substrate. It was concluded that the hydroxide is capable of performing a nucleophilic attack at the peptide carbonyl from its bridging position without the need to first become terminal. The two zinc ions are shown to have quite different roles. Zn2 binds the amino group of the substrate, thereby orienting it toward the nucleophile, while Zn1 stabilizes the alkoxide ion of the tetrahedral intermediate, thereby lowering the barrier for the nucleophilic attack. The rate-limiting step is suggested to be the protonation of the nitrogen of the former peptide bond, which eventually leads to the cleavage of the C-N bond.