Mycobacteria possess a multi-layered cell wall that requires extensive remodelling during cell division. We investigated the role of an amidase_3 domain-containing N-acetylmuramyl-L-alanine amidase, a peptidoglycan remodelling enzyme implicated in cell division. We demonstrated that deletion of MSMEG_6281 (Ami1) in Mycobacterium smegmatis resulted in the formation of cellular chains, illustrative of cells that were unable to complete division. Suprisingly, viability in the Δami1 mutant was maintained through atypical lateral branching, the products of which proceeded to form viable daughter cells. We showed that these lateral buds resulted from mislocalization of DivIVA, a major determinant in facilitating polar elongation in mycobacterial cells. Failure of Δami1 mutant cells to separate also led to dysregulation of FtsZ ring bundling. Loss of Ami1 resulted in defects in septal peptidoglycan turnover with release of excess cell wall material from the septum or newly born cell poles. We noted signficant accumulation of 3-3 crosslinked muropeptides in the Δami1 mutant. We further demonstrated that deletion of ami1 leads to increased cell wall permeability and enhanced susceptiblity to cell wall targeting antibiotics. Collectively, these data provide novel insight on cell division in actinobacteria and highlights a new class of potential drug targets for mycobacterial diseases.