Chitin, the second most abundant polysaccharide on earth, is degraded by chitinases and chitobiases. The structure of Serratia marcescens chitobiase has been refined at 1.9 A resolution. The mature protein is folded into four domains and its active site is situated at the C-terminal end of the central (beta alpha)8-barrel. Based on the structure of the complex with the substrate disaccharide chitobiose, we propose an acid-base reaction mechanism, in which only one protein carboxylate acts as catalytic acid, while the nucleophile is the polar acetamido group of the sugar in a substrate-assisted reaction. The structural data lead to the hypothesis that the reaction proceeds with retention of anomeric configuration. The structure allows us to model the catalytic domain of the homologous hexosaminidases to give a structural rationale to pathogenic mutations that underlie Tay-Sachs and Sandhoff disease.