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The mechanisms of intramembrane proteases are incompletely understood due to the lack of structural data on substrate complexes. To gain insight into substrate binding by rhomboid proteases, we have synthesised a series of novel peptidyl‐chloromethylketone ( CMK ) inhibitors and analysed their interactions with  Escherichia coli  rhomboid GlpG enzymologically and structurally. We show that peptidyl‐ CMK s derived from the natural rhomboid substrate TatA from bacterium  Providencia stuartii  bind GlpG in a substrate‐like manner, and their co‐crystal structures with GlpG reveal the S1 to S4 subsites of the protease. The S1 subsite is prominent and merges into the ‘water retention site’, suggesting intimate interplay between substrate binding, specificity and catalysis. Unexpectedly, the S4 subsite is plastically formed by residues of the L1 loop, an important but hitherto enigmatic feature of the rhomboid fold. We propose that the homologous region of members of the wider rhomboid‐like protein superfamily may have similar substrate or client‐protein binding function. Finally, using molecular dynamics, we generate a model of the Michaelis complex of the substrate bound in the active site of GlpG.

Substrate binding and specificity of rhomboid intramembrane protease revealed by substrate–peptide complex structures