Xaa-Pro dipeptidase (XPD) catalyzes hydrolysis of iminopeptide bond in dipeptides containing trans-proline as a second residue. XPDs are found in all living organisms and are believed to play an essential role in proline metab-olism. Here, we report crystal structures and extensive enzymatic studies of XPD from Xanthomonas campestris (XPDxc), the first such comprehensive study of a bacterial XPD. Wealsoreportenzymatic activities of its ortholog from Mycobacterium tuberculosis (XPDmt). These enzymes are strictly dipeptidaseswith broad substrate specific-ities. They exhibit substrate inhibition and allostericity, as described earlier for XPD from Lactococcus lactis (XPDll). The structural, mutational and comparative data have revealed a novel mechanism of dipeptide selectiv-ity and substrate binding in these enzymes. Moreover, we have identi fied conserved sequence motifs that distin-guish these enzymes from other prolidases, thus defining a new subfamily. This study provides a suitable structural template for explaining unique properties of this XPDxc subfamily. In addition, we report unique struc-tural features of XPDxc protein like an extended N-terminal tail region and absence of a conserved Tyr residue near the active site.