Dipeptidyl peptidase IV (DPP-IV) belongs to a family of serine peptidases, and due to its indirect regulatory role in plasma glucose modulation, DPP-IV has become an attractive pharmaceutical target for diabetes therapy. DPP-IV inactivates the glucagon-like peptide (GLP-1) and several other naturally produced bioactive peptides that contain preferentially a proline or alanine residue in the second amino acid sequence position by cleaving the N-terminal dipeptide. To elucidate the details of the active site for structure-based drug design, we crystallized a natural source preparation of DPP-IV isolated from rat kidney and determined its three-dimensional structure using X-ray diffraction techniques. With a high degree of similarity to structures of human DPP-IV, the active site architecture provides important details for the design of inhibitory compounds, and structures of inhibitor-protein complexes offer detailed insight into three-dimensional structure-activity relationships that include a conformational change of Tyr548. Such accommodation is exemplified by the response to chemical substitution on 2-cyanopyrrolidine inhibitors at the 5 position, which conveys inhibitory selectivity for DPP-IV over closely related homologues. A similar conformational change is also observed in the complex with an unrelated synthetic inhibitor containing a xanthine core that is also selective for DPP-IV. These results suggest the conformational flexibility of Tyr548 is unique among protein family members and may be utilized in drug design to achieve peptidase selectivity.