Fibroblast activation protein (FAP) and dipeptidyl peptidase-4 (DPP-4) are highly homologous serine proteases of the prolyl peptidase family and therapeutic targets for cancer and diabetes, respectively. Both proteases display dipeptidyl peptidase activity, but FAP alone has endopeptidase activity. FAP Ala657, which corresponds to DPP-4 Asp663, is important for endopeptidase activity; however, its specific role remains unclear, and it is unknown whether conserved DPP-4 substrate binding residues support FAP endopeptidase activity. Using site-directed mutagenesis and kinetic analyses, we show here that Ala657 and five conserved active site residues (Arg123, Glu203, Glu204, Tyr656, and Asn704) promote FAP endopeptidase activity via distinct mechanisms of transition state stabilization (TSS). The conserved residues provide marked TSS energy for both endopeptidase and dipeptidyl peptidase substrates, and structural modeling supports their function in binding both substrates. Ala657 also stabilizes endopeptidase substrate binding and additionally dictates FAP reactivity with transition state inhibitors, allowing tight interaction with tetrahedral intermediate analogues but not acyl−enzyme analogues. Conversely, DPP-4 Asp663 stabilizes dipeptidyl peptidase substrate binding and permits tight interaction with both transition state analogues. Structural modeling suggests that FAP Ala657 and DPP-4 Asp663 confer their contrasting effects on TSS by modulating the conformation of conserved residues FAP Glu204 and DPP-4 Glu206. FAP therefore requires the combined function of Ala657 and the conserved residues for endopeptidase activity.