The dipeptide glycyl-L-tyrosine (GY) can be either a substrate for carboxypeptidase A (CPA) or an inhibitor, depending on pH. In this work, we investigate the pH-dependent reactivity of this dipeptide in CPA-catalyzed hydrolysis using a combined quantum mechanical and molecular mechanical method. It is shown that the monoionic form of the dipeptide, prevalent at high pH, chelates the active site zinc ion, rendering the enzyme inactive. This inhibitory form is consistent with an earlier X-ray structure of the CPA GY complex. On the other hand, the prevailing di-ionic form of the dipeptide at low pH was found to undergo hydrolysis via a nucleophilic mechanism, leading to an acyl enzyme complex. The stability of this reaction intermediate is consistent with previous low-temperature solid-state NMR results. The calculated overall free-energy barrier of 20.1 kcal/mol is in excellent agreement with the experimental value of 19.9 kcal/mol.