In the presence of an adequate nucleophilic acceptor substrate (A) and ester and thiolester donor substrates (S), the Streptomyces R61 soluble DD-peptidase catalyzes both hydrolysis and acyl group transfer reactions. Simple bisubstrate models do not explain the variations of the transfer to hydrolysis ratios with the donor and acceptor concentrations. A new kinetic mechanism for the concomitant hydrolysis and transfer reactions is proposed which involves an acceptor and a second, nonproductive donor substrate binding site. In this model, the acceptor essentially binds to the acyl-enzyme, and the second donor molecule only binds to the ternary ES*A complex. Hydrolysis can then proceed from the quaternary ES*AS complex. The values of all of the parameters involved in the reaction of a thiolester substrate with D-alanine as the acceptor substrate were determined at 15 and 37-degrees-C. The results obtained with a protein modified by site-directed mutagenesis, and with which the transpeptidation reaction appeared to be specifically impeded, are discussed on the basis of the new kinetic mechanism. The data obtained with the soluble form of the high molecular weight penicillin binding protein 2X from Streptococcus pneumoniae are also in agreement with this model.