Acylpeptide hydrolase of Aeropyrum pernix K1 is composed of a catalytic alpha/beta hydrolase domain and a non-catalytic beta-propeller domain. The Glu88 residue of the propeller domain is highly conserved in the prolyl oligopeptidase family and forms an inter-domain salt bridge with Arg526, a key residue for substrate binding. We have dissected the functions of Glu88 using site-directed mutagenesis, steady-state kinetics analyses, and molecular dynamics simulations. In E88A and E88A/R526K mutants, with a broken inter-domain salt bridge and a positive charge at position 526, catalytic activities for both a peptidase substrate and an esterase substrate were almost abolished. Analysis of the pH dependence of the mutants' reaction kinetics indicates that these mutations lead to changes in the electrostatic environment of the active site, which can be modulated by chloride ions. These findings indicate that the neutralization at position 526 is favorable for the activity of the enzyme, which is also verified by the catalytic behavior of E88A/R526V mutant. All mutants have lower thermodynamic stability than the wild-type. Therefore, Glu88 plays two major roles in the function of the enzyme: neutralizing the positive charge of Arg526, thereby increasing the enzymatic activity, and forming the Glu88-Arg526 salt bridge, thereby stabilizing the protein.