Information on subsite specificity of the transglutaminase (TG) is important to design any specific peptides for TG's applications and inhibitor studies. Here, mRNA display was introduced for identifying the subsite specificity of TG from Streptomyces mobaraensis (STG). Functionally active peptides expressed from mRNA display library were differentially conjugated to hexa lysine (K6)—beads according to their relative activities for STG. The active peptide substrates for STG were enriched through six rounds of screening, and its corresponding cDNA/mRNA sequences were identified by DNA sequencing. The results showed that tripeptides such as LQQ and TQP do not show any activity for STG, but the minimum size of the peptide displaying STG activity is pentapeptide. One such predicted peptide sequence, that is, RLQQP (TQ1), showed higher reactivity (ca. 182% conjugation yield) to STG than that of the highly active sequence, that is, control-Q (PQPQLPYPQPQLPY), well-known previously for mammalian TG2. Furthermore, when recombinant DsRed was tagged with TQ1 sequence at its C-terminal, DsRed-TQ1 underwent efficient covalent-immobilization onto alginate–gelatin bead by STG reaction, showing a Q-peptide application as a useful tagging molecule. Biotechnol. Bioeng. 2013; 110: 353–362. © 2012 Wiley Periodicals, Inc.