The crystal structure of Escherichia coli GAR Tfase at 2.1 A resolution in complex with 10-formyl-5,8,10-trideazafolic acid (10-formyl-TDAF, K(i) = 260 nM), an inhibitor designed to form an enzyme-assembled multisubstrate adduct with the substrate, beta-GAR, was studied to determine the exact nature of its inhibitory properties. Rather than forming the expected covalent adduct, the folate inhibitor binds as the hydrated aldehyde (gem-diol) in the enzyme active site, in a manner that mimics the tetrahedral intermediate of the formyl transfer reaction. In this hydrated form, the inhibitor not only provides unexpected insights into the catalytic mechanism but also explains the 10-fold difference in inhibitor potency between 10-formyl-TDAF and the corresponding alcohol, and a further 10-fold difference for inhibitors that lack the alcohol. The presence of the hydrated aldehyde was confirmed in solution by (13)C-(1)H NMR spectroscopy of the ternary GAR Tfase-beta-GAR-10-formyl-TDAF complex using the (13)C-labeled 10-formyl-TDAF. This insight into the behavior of the inhibitor, which is analogous to protease or transaminase inhibitors, provides a novel and previously unrecognized basis for the design of more potent inhibitors of the folate-dependent formyl transfer enzymes of the purine biosynthetic pathway and development of anti-neoplastic agents.