Mouse serine racemase (mSR) is a pyridoxal 5'-phosphate dependent enzyme that catalyzes the biosynthesis of the N-methyl-d-aspartate receptor coagonist d-serine in the brain. Furthermore, mSR catalyzes beta-elimination of serine and l-serine-O-sulfate into pyruvate. The biological significance of this beta-elimination activity and the factors influencing mSR substrate and reaction specificity, which are crucial for prospective inhibitor design, are poorly understood. Using a bacterial expression system and ATP-agarose affinity chromatography, we have generated a pure and active recombinant mSR and investigated its substrate and reaction specificity in vitro by analyzing a systematic series of compounds derived from l-Ser and l-serine-O-sulfate. The analysis revealed several competitive inhibitors of serine racemization including glycine (K(I) = 1.63 mM), several dicarboxylic acids including malonate (K(I) = 0.077 mM), and l-erythro-3-hydroxyaspartate (K(I) = 0.049 mM). The latter compound represents the most effective inhibitor of SR reported to date. A simple inversion of the beta-carbon configuration of the compound yields an excellent beta-elimination substrate l-threo-3-hydroxyaspartate. Inhibition analysis indicates that racemization and beta-elimination activities of mSR reside at the same active site. While the racemization activity is specific to serine, the beta-elimination activity has a broader specificity for l-amino acids with a suitable leaving group at the beta-carbon and optimal spatial orientation of the alpha-carboxyl and leaving groups. The possible implications of our observations for inhibitor design, regulation of activity, and function of mSR are discussed.