Esterases form a diverse class of enzymes of largely unknown physiological role. Because many drugs and pesticides carry ester functions, the hydrolysis of such compounds forms at least one potential biological function. Carboxylesterases catalyze the hydrolysis of short chain aliphatic and aromatic carboxylic ester compounds. Esterases, D-alanyl-D-alanine-peptidases (DD-peptidases) and beta-lactamases can be grouped into two distinct classes of hydrolases with different folds and topologically unrelated catalytic residues, the one class comprising of esterases, the other one of beta-lactamases and DD-peptidases. The chemical reactivities of esters and beta-lactams towards hydrolysis are quite similar, which raises the question of which factors prevent esterases from displaying beta-lactamase activity and vice versa. Here we describe the crystal structure of EstB, an esterase isolated from Burkholderia gladioli. It shows the protein to belong to a novel class of esterases with homology to Penicillin binding proteins, notably DD-peptidase and class C beta-lactamases. Site-directed mutagenesis and the crystal structure of the complex with diisopropyl-fluorophosphate suggest Ser75 within the "beta-lactamase" Ser-x-x-Lys motif to act as catalytic nucleophile. Despite its structural homology to beta-lactamases, EstB shows no beta-lactamase activity. Although the nature and arrangement of active-site residues is very similar between EstB and homologous beta-lactamases, there are considerable differences in the shape of the active site tunnel. Modeling studies suggest steric factors to account for the enzyme's selectivity for ester hydrolysis versus beta-lactam cleavage.