Recently we screened a combinatorial library of R(1)-(Ser/Thr)-Xaa-His-Zaa-R(2) peptides (Xaa = 17 common alpha-amino acids, except Asp, Glu, and Cys; Zaa =19 common alpha-amino acids, except Cys; R(1) = CH(3)CO-Gly-Ala, R(2) = Lys-Phe-Leu-NH(2)) and established criteria for selecting Ser/Thr, Xaa, and Zaa substitutions optimal for specific R(1)-Ser/Thr peptide bond hydrolysis in the presence of Ni(II) ions (Krezel, A.; Kopera, E.; Protas, A. M.; Poznanski, J.; Wysłouch-Cieszynska, A.; Bal, W. J. Am. Chem. Soc. 2010, 132, 3355-3366). The screening results were confirmed by kinetic studies of hydrolysis of seven peptides: R(1)-Ser-Arg-His-Trp-R(2), R(1)-Ser-Lys-His-Trp-R(2), R(1)-Ser-Ala-His-Trp-R(2), R(1)-Ser-Arg-His-Ala-R(2), R(1)-Ser-Gly-His-Ala-R(2), R(1)-Thr-Arg-His-Trp-R(2), and R(1)-Thr-His-His-Trp-R(2). In this paper, we used the same seven peptides to investigate the molecular mechanism of the hydrolysis reaction. We studied temperature dependence of the reaction rate at temperatures between 24 and 75 degrees C, measured stability constants of Ni(II) complexes with hydrolysis substrates and products, and studied the course of R(1)-Ser-Arg-His-Trp-R(2) peptide hydrolysis under a broad range of conditions. We established that the specific square planar complex containing the Ni(II) ion bonded to the His imidazole nitrogen and three preceding peptide bond nitrogens (4N complex) is required for the reaction to occur. The reaction mechanism includes the N-O acyl shift, yielding an intermediate ester of R(1) with the Ser/Thr hydroxyl group. This ester hydrolyzes spontaneously, yielding final products. The Ni(II) ion activates the R(1)-Ser peptide bond by destabilizing it directly through peptide nitrogen coordination and, indirectly, by imposing a strain in the peptide chain.