The N-terminal nucleophile (Ntn) hydrolases are a superfamily of enzymes specialized in the hydrolytic cleavage of amide bonds. Even though several members of this family are emerging as innovative drug targets for cancer, inflammation, and pain, the processes through which they catalyze amide hydrolysis remains poorly understood. In particular, the catalytic reactions of cysteine Ntn-hydrolases have never been investigated from a mechanistic point of view. In the present study, we used free energy simulations in the quantum mechanics/molecular mechanics framework to determine the reaction mechanism of amide hydrolysis catalyzed by the prototypical cysteine Ntn-hydrolase, conjugated bile acid hydrolase (CBAH). The computational analyses, which were confirmed in water and using different CBAH mutants, revealed the existence of a chair-like transition state, which might be one of the specific features of the catalytic cycle of Ntn-hydrolases. Our results offer new insights on Ntn-mediated hydrolysis and suggest possible strategies for the creation of therapeutically useful inhibitors.