Peptidase family U34 consists of enzymes with unclear catalytic mechanism, for instance, dipeptidase A from Lactobacillus helveticus. Using extensive sequence similarity searches, we infer that U34 family members are homologous to penicillin V acylases (PVA) and thus potentially adopt the N-terminal nucleophile (Ntn) hydrolase fold. Comparative sequence and structural analysis reveals a cysteine as the catalytic nucleophile as well as other conserved residues important for catalysis. The PVA/U34 family is variable in sequence and exhibits great diversity in substrate specificity, to include enzymes such as choloyglycine hydrolases, acid ceramidases, isopenicillin N acyltransferases, and a subgroup of eukaryotic proteins with unclear function.