The properties of synthetic peptides, including potency, stability, and bioavailability, are strongly influenced by modification of the peptide chain termini. Unfortunately, generally applicable methods for selective and mild C-terminal peptide functionalization are lacking. In this work, we explored the peptide amidase from Stenotrophomonas maltophilia as a versatile catalyst for diverse carboxy-terminal peptide modification reactions. Because the scope of application of the enzyme is hampered by its mediocre stability, we used computational protein engineering supported by energy calculations and molecular dynamics simulations to discover a number of stabilizing mutations. Twelve mutations were combined to yield a highly thermostable (Delta T-m = 23 degrees C) and solvent-compatible enzyme. Protein crystallography and molecular dynamics simulations revealed the biophysical effects of mutations contributing to the enhanced robustness. The resulting enzyme catalyzed the selective C-terminal modification of synthetic peptides with small nucleophiles such as ammonia, methylamine, and hydroxylamine in various organic (co)solvents. The use of a nonaqueous environment allowed modification of peptide free acids with >85% product yield under thermodynamic control. On the basis of the crystal structure, further mutagenesis gave a biocatalyst that favors introduction of larger functional groups. Thus, the use of computational and rational protein design provided a tool for diverse enzymatic peptide modification.