Peptide deformylase is an essential metalloenzyme required for the removal of the formyl group at the N terminus of nascent polypeptide chains in eubacteria. The Escherichia coli enzyme uses Fe2+ and nearly retains its activity on substitution of the metal ion by Ni2+. We have solved the structure of the Ni2+ enzyme at 1.9-A resolution by x-ray crystallography. Each of the three monomers in the asymmetric unit contains one Ni2+ ion and, in close proximity, one molecule of polyethylene glycol. Polyethylene glycol is shown to be a competitive inhibitor with a KI value of 6 mM with respect to formylmethionine under conditions similar to those used for crystallization. We have also solved the structure of the inhibitor-free enzyme at 2.5-A resolution. The two structures are identical within the estimated errors of the models. The hydrogen bond network stabilizing the active site involves nearly all conserved amino acid residues and well defined water molecules, one of which ligates to the tetrahedrally coordinated Ni2+ ion.