Tissue transglutaminase (TGase) is a Ca(2+)-dependent enzyme that catalyzes cross-linking of intracellular proteins through a mechanism that involves isopeptide bond formation between Gln and Lys residues. In addition to its transamidation activity, TGase can bind guanosine 5'-triphosphate (GTP) and does so in a manner that is antagonized by calcium. Once bound, GTP undergoes hydrolysis to form guanosine 5'-diphosphate and inorganic phosphate. TGase is thought to play a pathogenic role in neurodegenerative diseases by promoting aggregation of disease-specific proteins that accumulate in these disorders. Thus, this enzyme represents a viable target for drug discovery. We now report the development of a mechanism-based assay for TGase and the results of a screen using this assay in which we tested 56,500 drug-like molecules for their ability to inhibit TGase. In this assay, the Gln- and Lys-donating substrates are N,N-dimethylated casein (NMC) and N-Boc-Lys-NH-CH(2)-CH(2)-NH-dansyl (KXD), respectively. Through a combination of steady state kinetic experiments and reaction progress curve simulations, we were able to calculate values for the initial concentrations of NMC, KXD, and Ca(2+) that would produce a steady state situation in which all thermodynamically significant forms of substrate-bound TGase exist in equal concentration. Under these conditions, the assay is sensitive to both competitive and mixed active-site inhibitors and to inhibitors that bind to the GTP site. The assay was optimized for automated screening in 384-well format and was then used to test our compound library. From among these compounds, 104 authentic hits that represent several mechanistic classes were identified.