SACTE_5457 is secreted by Streptomyces sp. SirexAA-E, a highly cellulolytic actinobacterium isolated from a symbiotic community composed of insects, fungi, and bacteria. Here we report the 1.84 Å resolution crystal structure and functional characterization of SACTE_5457. This enzyme is a member of the glycosyl hydrolase family 46 and is composed of two α-helical domains that are connected by an α-helical linker. The catalytic residues (Glu74 and Asp92) are separated by 10.3 Å, matching the distance predicted for an inverting hydrolysis reaction. Normal mode analysis suggests that the connecting α-helix is flexible and allows the domain motion needed to place active site residues into an appropriate configuration for catalysis. SACTE_5457 does not react with chitin, but hydrolyzes chitosan substrates with an ∼4-fold improvement in kcat/KM as the percentage of acetylation and the molecular weights decrease. Analysis of the time dependence of product formation shows that oligosaccharides with degree of polymerization <4 are not hydrolyzed. By combining the results of substrate docking to the X-ray structure and end-product analysis, we deduce that SACTE_5457 preferentially binds substrates spanning the −2 to +2 sugar binding subsites, and that steric hindrance prevents binding of N-acetyl-d-glucosamine in the +2 subsite and may weakly interfere with binding of N-acetyl-d-glucosamine in the +1 subsites. A proposal for how these constraints account for the observed product distributions is provided. Proteins 2014; 82:1245–1257. © 2013 Wiley Periodicals, Inc.