The role of the unique fully conserved tryptophan in metallopeptidase family M49 (dipeptidyl peptidase III family) was investigated by site-directed mutagenesis on human dipeptidyl peptidase III (DPP III) where Trp300 was subjected to two substitutions (W300F and W300L). The mutant enzymes showed thermal stability equal to the wild-type DPP III. Conservative substitution of the Trp300 with phenylalanine decreased enzyme activity 2-4 fold, but did not significantly change the K(m) values for two dipeptidyl 2-naphthylamide substrates. However, the K(m) for the W300L mutant was elevated 5-fold and the k(cat) value was reduced 16-fold with Arg-Arg-2-naphthylamide. Both substitutions had a negative effect on the binding of two competitive inhibitors designed to interact with S1 and S2 subsites. These results indicate the importance of the aromatic nature of W300 in DPP III ligand binding and catalysis, and contribution of this residue in maintaining the functional integrity of this enzyme's S2 subsite.