Many lipases and esterases show striking similarities in their enantioselectivities, and empirical rules have been formulated to predict the preferred stereochemistry for various types of reactions. A rule for formation of secondary alcohols predicts which enantiomer reacts faster based on the relative sizes of the substituents at the stereocenter. We report the first direct determination of the mechanism by which a lipase distinguishes between enantiomers and provide a general structural explanation of the aforementioned empirical rule. We determined X-ray crystal structures of covalent complexes of Candida rugosa lipase with transition-state analogs for the hydrolysis of menthyl esters. One structure contains (1R)-menthyl hexylphosphonate, 1R, derived from the fast-reacting enantiomer of menthol; the other contains (1S)-menthyl hexylphosphonate, 1S, derived from the slow-reacting enantiomer. These high-resolution three-dimensional structures show, firstly, that the empirical rule determined by substrate mapping is a good low-resolution description of the alcohol binding site in Candida rugosa lipase. Secondly, interactions between the menthyl ring of the slow-reacting enantiomer and the histidine of the catalytic triad disrupt the hydrogen bond between N epsilon 2 of the imidazole ring and the menthol oxygen atom, likely accounting for the slower reaction of the (1S)-enantiomer of menthol. Thirdly, the enantiopreference of CRL toward secondary alcohols is set, not by an alcohol binding site separate from the catalytic site but by the same loops that assemble the catalytic machinery. The common orientation of these loops among many lipases and esterases accounts for their common enantiopreference toward secondary alcohols. This identification of the enantioselection mechanism sets the stage for rational enantioselective syntheses with lipases.