We have detected an anhydride intermediate in the CPA catalyzed proteolytic reaction of Gly-Tyr. It appears that since the zinc-bound water molecule which is believed to attack the scissile amide carbonyl carbon in the hydrolysis reaction is excluded by the N-terminal amino group of Gly-Tyr, the carboxylate of Glu-270 becomes to attack the amide bond to generate the anhydride intermediate.