Carboxyl-terminal amidation, a required post-translational modification for the bioactivation of many neuropeptides, entails sequential enzymatic action by peptidylglycine -monooxygenase (PAM, EC 1.14.17.3) and peptidylamidoglycolate lyase (PGL, EC 4.3.2.5). The monooxygenase, PAM, first catalyzes conversion of a glycine-extended pro-peptide to the corresponding -hydroxyglycine derivative, and the lyase, PGL, then catalyzes breakdown of this -hydroxyglycine derivative to the amidated peptide plus glyoxylate. We have previously established that PAM and PGL exhibit tandem reaction stereospecificities, with PAM producing, and PGL being reactive toward, only -hydroxyglycine derivatives of absolute configuration (S). We now demonstrate that PAM and PGL exhibit dramatically different subsite stereospecificities toward the residue at the penultimate position (the P residue) in both substrates and inhibitors. Incubation of Ac-L-Phe-Gly, Ac-L-Phe-L-Phe-Gly, or (S)-O-Ac-mandelyl-Gly with PAM results in complete conversion of these substrates to the corresponding -hydroxylated products, whereas the corresponding X-D-Phe-Gly compounds undergo conversions of <1%. The K of Ac-D-Phe-Gly is at least 700-fold higher than that of Ac-L-Phe-Gly, and the same pattern holds for other substrate stereoisomers. This S subsite stereospecificity of PAM also holds for competitive inhibitors; thus, the K of 45 µM for Ac-L-Phe-OCHCOH increases to 2,247 µM for the -D-Phe- enantiomer. In contrast, incubation of PGL with Ac-L-Phe--hydroxy-Gly, Ac-D-Phe--hydroxy-Gly, (S)-O-Ac-mandelyl--hydroxy-Gly, or (R)-O-Ac-mandelyl--hydroxy-Gly results in facile enzymatic conversion of each of these compounds to their corresponding amide products. The simultaneous expression of high reaction stereospecificity and low Ssubsite stereospecificity in the course of PGL catalysis was illustrated by a series of experiments in which enzymatic conversion of the diastereomers of Ac-L-Phe--hydroxy-Gly and Ac-D-Phe--hydroxy-Gly was monitored directly by HPLC. Kinetic parameters were determined for both substrates and potent competitive inhibitors of PGL, and the results confirm that, in sharp contrast to PAM, the configuration of the chiral moiety at the P position has virtually no effect on binding or catalysis. These results illustrate a case where catalytic domains, which must function sequentially (and with tandem reaction stereochemistry) in a given metabolic process, nevertheless exhibit sharply contrasting subsite stereospecificities toward the binding of substrates and inhibitors.