The crystal structures of two homologous endopeptidases from cyanobacteria Anabaena variabilis and Nostoc punctiforme were determined at 1.05 and 1.60 A resolution, respectively, and contain a bacterial SH3-like domain (SH3b) and a ubiquitous cell-wall-associated NlpC/P60 (or CHAP) cysteine peptidase domain. The NlpC/P60 domain is a primitive, papain-like peptidase in the CA clan of cysteine peptidases with a Cys126/His176/His188 catalytic triad and a conserved catalytic core. We deduced from structure and sequence analysis, and then experimentally, that these two proteins act as gamma-D-glutamyl-L-diamino acid endopeptidases (EC 3.4.22.-). The active site is located near the interface between the SH3b and NlpC/P60 domains, where the SH3b domain may help define substrate specificity, instead of functioning as a targeting domain, so that only muropeptides with an N-terminal L-alanine can bind to the active site.