The beta-lactams are the most important class of antibiotics in clinical use. Their lethal targets are the transpeptidase domains of penicillin binding proteins (PBPs), which catalyze the cross-linking of bacterial peptidoglycan (PG) during cell wall synthesis. The transpeptidation reaction occurs in two steps, the first being formation of a covalent enzyme intermediate and the second involving attack of an amine on this intermediate. Here we use defined PG substrates to dissect the individual steps catalyzed by a purified E. coli transpeptidase. We demonstrate that this transpeptidase accepts a set of structurally diverse D-amino acid substrates and incorporates them into PG fragments. These results provide new information on donor and acceptor requirements as well as a mechanistic basis for previous observations that noncanonical D-amino acids can be introduced into the bacterial cell wall.