Sir2 enzymes form a unique class of NAD⁺-dependent deacetylases required for diverse biological processes, including transcriptional silencing, regulation of apoptosis, fat mobilization, and lifespan regulation. Sir2 activity is regulated by nicotinamide, a noncompetitive inhibitor that promotes a base-exchange reaction at the expense of deacetylation. To elucidate the mechanism of nicotinamide inhibition, we determined ternary complex structures of Sir2 enzymes containing nicotinamide. The structures show that free nicotinamide binds in a conserved pocket that participates in NAD⁺ binding and catalysis. Based on our structures, we engineered a mutant that deacetylates peptides by using nicotinic acid adenine dinucleotide (NAAD) as a cosubstrate and is inhibited by nicotinic acid. The characteristics of the altered specificity enzyme establish that Sir2 enzymes contain a single site that participates in catalysis and nicotinamide regulation and provides additional insights into the Sir2 catalytic mechanism.