Proteasomes belong to the N-terminal nucleophile group of amidases and function through a novel proteolytic mechanism, in which the hydroxyl group of the N-terminal threonines is the catalytic nucleophile. However, it is unclear why threonine has been conserved in all proteasomal active sites, because its replacement by a serine in proteasomes from the archaeon Thermoplasma acidophilum (T1S mutant) does not alter the rates of hydrolysis of Suc-LLVY-amc (Seemüller, E., Lupas, A., Stock, D., Lowe, J., Huber, R., and Baumeister, W. (1995) Science 268, 579-582) and other standard peptide amide substrates. However, we found that true peptide bonds in decapeptide libraries were cleaved by the T1S mutant 10-fold slower than by wild type (wt) proteasomes. In degrading proteins, the T1S proteasome was 3.5- to 6-fold slower than the wt, and this difference increased when proteolysis was stimulated using the proteasome-activating nucleotidase (PAN) ATPase complex. With mutant proteasomes, peptide bond cleavage appeared to be rate-limiting in protein breakdown, unlike with wt. Surprisingly, a peptide ester was hydrolyzed by both particles much faster than the corresponding amide, and the T1S mutant cleaved it faster than the wt. Moreover, the T1S mutant was inactivated by the ester inhibitor clasto-lactacystin-beta-lactone severalfold faster than the wt, but reacted with nonester irreversible inhibitors at similar rates. T1A and T1C mutants were completely inactive in all these assays. Thus, proteasomes lack additional active sites, and the N-terminal threonine evolved because it allows more efficient protein breakdown than serine.