The stereochemistry of the reaction catalysed by Serratia marcescens chitobiase was determined by HPLC separation of the anomers of N-acetylglucosamine produced during the hydrolysis of p-nitrophenyl N-acetyl-beta-d-glucosaminide (PNP-GlcNAc). In the early stages of the reaction, the beta-anomer was found to prevail, whereas the alpha-anomer dominated at mutarotation equilibrium. This established that chitobiase hydrolyses glycosidic bonds with overall retention of the anomeric configuration. Chitobiase-catalysed hydrolysis of PNP-GlcNAc was competitively inhibited by a series of chito-oligosaccharides (degree of polymerization 2-5) that were selectively de-N-acetylated at their non-reducing end. The results are in accord with the participation of the acetamido group at C-2 of the substrate in the catalytic mechanism of chitobiase and related enzymes.