Despite intensive research, the mechanism of the rapid retardation in the rates of cellobiohydrolase (CBH) catalyzed cellulose hydrolysis is still not clear. Interpretation of the hydrolysis data has been complicated by the inability to measure the catalytic constants for CBH-s acting on cellulose. We developed a method for measuring the observed catalytic constant (kobs) for CBH catalyzed cellulose hydrolysis. It relies on in situ measurement of the concentration of CBH with the active site occupied by the cellulose chain. For that we followed the specific inhibition of the hydrolysis of para-nitrophenyl-β-D-lactoside by cellulose. The method was applied to CBH-s TrCel7A from Trichoderma reesei and PcCel7D from Phanerochaete chrysosporium and their isolated catalytic domains. Bacterial microcrystalline cellulose, Avicel, amorphous cellulose, and lignocellulose were used as substrates. A rapid decrease of kobs in time was observed on all substrates. The kobs values for PcCel7D were about 1.5 times higher than those for TrCel7A. In case of both TrCel7A and PcCel7D, the kobs values for catalytic domains were similar to those for intact enzymes. A model where CBH action is limited by the average length of obstacle-free way on cellulose chain is proposed. Once formed, productive CBH–cellulose complex proceeds with a constant rate determined by the true catalytic constant. After encountering an obstacle CBH will “get stuck” and the rate of further cellulose hydrolysis will be governed by the dissociation rate constant (koff), which is low for processive CBH-s. Biotechnol. Bioeng. 2010;106: 871–883. © 2010 Wiley Periodicals, Inc.