Carbohydrate active enzymes (CAZymes) are a large class of enzymes, which build and breakdown the complex carbohydrates of the cell. On the basis of their amino acid sequences they are classified in families and clans that show conserved catalytic mechanism, structure, and active site residues, but may vary in substrate specificity. We report here the identification and the detailed molecular characterization of a novel glycoside hydrolase encoded from the gene sso1353 of the hyperthermophilic archaeon Sulfolobus solfataricus. This enzyme hydrolyzes aryl beta-gluco- and beta-xylosides and the observation of transxylosylation reactions products demonstrates that SSO1353 operates via a retaining reaction mechanism. The catalytic nucleophile (Glu-335) was identified through trapping of the 2-deoxy-2-fluoroglucosyl enzyme intermediate and subsequent peptide mapping, while the general acid/base was identified as Asp-462 through detailed mechanistic analysis of a mutant at that position, including azide rescue experiments. SSO1353 has detectable homologs of unknown specificity among Archaea, Bacteria, and Eukarya and shows distant similarity to the non-lysosomal bile acid beta-glucosidase GBA2 also known as glucocerebrosidase. On the basis of our findings we propose that SSO1353 and its homologs are classified in a new CAZy family, named GH116, which so far includes beta-glucosidases (EC 3.2.1.21), beta-xylosidases (EC 3.2.1.37), and glucocerebrosidases (EC 3.2.1.45) as known enzyme activities.