The effects of C-terminal truncation on the equilibrium folding transitions and folding kinetics of B. licheniformis exo small beta-lactamase (ES-betaL) have been measured. ES-betaL lacking 19 residues (ES-betaL(C)(Delta)(19)) has no enzymic activity. Deletion of the last 14 residues produces ES-betaL(C)(Delta)(14), which is 0.1% active. The enzyme lacking nine residues (ES-betaL(C)(Delta)(9)) is nearly fully active, has native optical and hydrodynamic properties, and is protease resistant, a distinguishing feature of the wild-type enzyme. Although ES-betaL(C)(Delta)(9) folds properly, it does so 4 orders of magnitude slower than ES-betaL, making possible the isolation and characterization of a compact intermediate state (I(P) ES-betaL(C)(Delta)(9)). Based on the analysis of folding rates and equilibrium constants, we propose that equilibrium between I(P) ES-betaL(C)(Delta)(9) and other intermediate slow folding. Residues removed in ES-betaL(C)(Delta)(9) and ES-betaL(C)(Delta)(14) are helical and firmly integrated into the enzyme body through many van der Waals interactions involving residues distant in sequence. The results suggest that the deleted residues play a key role in the folding process and also the existence of a modular organization of the protein matrix, at the subdomain level. The results are compared with other examples of this kind in the folding literature.