An increased reaction rate for lipase-catalyzed N-acylation of amino alcohols relative to that of monofunctionalized amines can be explained by a hydrogen shuttling mechanism that avoids nitrogen inversion in the transition state. The mechanism does not involve acyl migration from an ester intermediate that would be formed first, an explanation that permeates the literature. Our suggested reaction mechanism is dependent on the preference of amino alcohols to form intramolecular hydrogen bonds and the capability of the enzyme to accommodate and exploit the specific hydrogen bonding pattern provided by the ligand during catalysis. Our proposed proton shuttle mechanism involves the transfer of two protons in the transition state concomitant with a nucleophilic attack on the acyl enzyme and provides an explanation for the high reaction rate and chemoselectivity for lipase-catalyzed N-acylation of amino alcohols. Moreover, the proton shuttle mechanism explains the increased reaction rate for the enzyme-catalyzed N-acylation of diamines and of methoxy-2-propylamine, for which O- to N-acyl migration is impossible. A linear free-energy relationship analysis based on the experimental results showed that all of our investigated difunctionalized amine substrates afforded a substrate-assisted rate acceleration of the N-acylation by the same reaction mechanism. Furthermore, the results of the analysis were consistent with partial proton transfer in the rate-limiting transition state, which further supports our suggested proton shuttle mechanism.