The catalytic mechanism of the 20S proteasome from the archaebacterium Thermoplasma acidophilum has been analyzed by site-directed mutagenesis of the beta subunit and by inhibitor studies. Deletion of the amino-terminal threonine or its mutation to alanine led to inactivation of the enzyme. Mutation of the residue to serine led to a fully active enzyme, which was over ten times more sensitive to the serine protease inhibitor 3,4-dichloroisocoumarin. In combination with the crystal structure of a proteasome-inhibitor complex, the data show that the nucleophilic attack is mediated by the amino-terminal threonine of processed beta subunits. The conservation pattern of this residue in eukaryotic sequences suggests that at least three of the seven eukaryotic beta-type subunit branches should be proteolytically inactive.