Rhomboids are ubiquitous intramembrane serine proteases involved in various signaling pathways. While the high-resolution structures of the Escherichia coli rhomboid GlpG with various inhibitors revealed an active site comprised of a serine-histidine dyad and an extensive oxyanion hole, the molecular details of rhomboid catalysis were unclear because substrates are unknown for most of the family members. Here we used the only known physiological pair of AarA rhomboid with its psTatA substrate to decipher the contribution of catalytically important residues to the reaction rate enhancement. An MD-refined homology model of AarA was used to identify residues important for catalysis. We demonstrated that the AarA active site geometry is strict and intolerant to alterations. We probed the roles of H83 and N87 oxyanion hole residues and determined that substitution of H83 either abolished AarA activity or reduced the transition state stabilization energy (ΔΔG‡) by 3.1 kcal/mol; substitution of N87 decreased ΔΔG‡ by 1.6-3.9 kcal/mol. Substitution M154, a residue conserved in most rhomboids that stabilizes the catalytic general base, to tyrosine, provided insight into the mechanism of nucleophile generation for the catalytic dyad. This study provides a quantitative evaluation of the role of several residues important for hydrolytic efficiency and oxyanion stabilization during intramembrane proteolysis.