Macrophage migration inhibitory factor (MIF) is a secreted protein that activates macrophages, neutrophils and T cells, and is implicated in sepsis, adult respiratory distress syndrome and rheumatoid arthritis. The mechanism of MIF function, however, is unknown. The three-dimensional structure of MIF is unlike that of any other cytokine, but bears striking resemblance to three microbial enzymes, two of which possess an N-terminal proline that serves as a catalytic base. Human MIF also possesses an N-terminal proline (Pro-1) that is invariant among all known homologues. Multiple sequence alignment of these MIF homologues reveals additional invariant residues that span the entire polypeptide but are in close proximity to the N-terminal proline in the folded protein. We find that p-hydroxyphenylpyruvate, a catalytic substrate of MIF, binds to the N-terminal region and interacts with Pro-1. Mutation of Pro-1 to a glycine substantially reduces the catalytic and cytokine activity of MIF. We suggest that the underlying biological activity of MIF may be based on an enzymatic reaction. The identification of the active site should facilitate the development of structure-based inhibitors.