Lysophospholipase_carboxylesterase (LPCE) has highly conserved homologs in many diverse species ranging from bacteria to humans, as well as substantial biological significance and potential therapeutic implications. However, its biological function and catalytic mechanism remain minimally investigated because of the lack of structural information. Here, we report the crystal structure of a bacterial esterase PE8 belonging to the LPCE family. The crystal structure of PE8 was solved with a high resolution of 1.66 Å. Compared with other homologs in the family, significant differences were observed in the amino acid sequence, three-dimensional structure, and substrate-binding pattern. Residue Arg79 undergoes configuration switching when binding to the substrate and forms a unique wall, leading to a relatively closed cavity in the substrate-binding pocket compared with the relatively more open and longer clefts in other homologs. Moreover, the mutant Met122Ala showed much stronger substrate affinity and higher catalytic efficiency because less steric repulsion acted on the substrates. Taken together, these results showed that, in PE8, Arg79 and Met122 play important roles in substrate binding and the binding pocket shaping, respectively. Our study provides new insight into the catalytic mechanism of LPCE, which may facilitate the development of structure-based therapeutics and other biocatalytic applications.