Silent information regulator 2 (Sir2) enzymes catalyze NAD+-dependent protein/histone deacetylation, where the acetyl group from the lysine epsilon-amino group is transferred to the ADP-ribose moiety of NAD+, producing nicotinamide and the novel metabolite O-acetyl-ADP-ribose. Sir2 proteins have been shown to regulate gene silencing, metabolic enzymes, and life span. Recently, nicotinamide has been implicated as a direct negative regulator of cellular Sir2 function; however, the mechanism of nicotinamide inhibition was not established. Sir2 enzymes are multifunctional in that the deacetylase reaction involves the cleavage of the nicotinamide-ribosyl, cleavage of an amide bond, and transfer of the acetyl group ultimately to the 2'-ribose hydroxyl of ADP-ribose. Here we demonstrate that nicotinamide inhibition is the result of nicotinamide intercepting an ADP-ribosyl-enzyme-acetyl peptide intermediate with regeneration of NAD+ (transglycosidation). The cellular implications are discussed. A variety of 3-substituted pyridines was found to be substrates for enzyme-catalyzed transglycosidation. A Brönsted plot of the data yielded a slope of +0.98, consistent with the development of a nearly full positive charge in the transition state, and with basicity of the attacking nucleophile as a strong predictor of reactivity. NAD+ analogues including beta-2'-deoxy-2'-fluororibo-NAD+ and a His-to-Ala mutant were used to probe the mechanism of nicotinamide-ribosyl cleavage and acetyl group transfer. We demonstrate that nicotinamide-ribosyl cleavage is distinct from acetyl group transfer to the 2'-OH ribose. The observed enzyme-catalyzed formation of a labile 1'-acetylated-ADP-fluororibose intermediate using beta-2'-deoxy-2'-fluororibo-NAD+ supports a mechanism where, after nicotinamide-ribosyl cleavage, the carbonyl oxygen of acetylated substrate attacks the C-1' ribose to form an initial iminium adduct.