The M16 family of zinc peptidases comprises a pair of homologous domains that form two halves of a "clam-shell" surrounding the active site. The M16A and M16C subfamilies form one class ("peptidasomes"): they degrade 30-70 residue peptides, and adopt both open and closed conformations. The eukaryotic M16B subfamily forms a second class ("processing proteases"): they adopt a single partly-open conformation that enables them to cleave signal sequences from larger proteins. Here, we report the solution and crystal structures of a prokaryotic M16B peptidase, and demonstrate that it has features of both classes: thus, it forms stable "open" homodimers in solution that resemble the processing proteases; but the clam-shell closes upon binding substrate, a feature of the M16A/C peptidasomes. Moreover, clam-shell closure is required for proteolytic activity. We predict that other prokaryotic M16B family members will form dimeric peptidasomes, and propose a model for the evolution of the M16 family.