Transglutaminase 2 (TG2) is a distinctive member of the family of Ca2+-dependent enzymes recognized mostly by their abilities to catalyze the posttranslational crosslinking of proteins. TG2 uniquely binds and hydrolyzes GTP; binding GTP inhibits its crosslinking activity but allows it to function in signal transduction (hence the G(h) designation). The core domain of TG2 (residues 139-471, rat) comprises the papain-like catalytic triad and the GTP-binding domain (residues 159-173) and contains almost all of the conserved tryptophans of the protein. Examining point mutations at Trp positions 180, 241, 278, 332, and 337 showed that, upon binding 2'-(or 3')-O-(N-methylanthraniloyl)GTP (mantGTP), the Phe-332 mutant was the weakest (35% less than wild type) in resonance energy transfer from the protein (lambda(exc, max) = 290 nm) to the mant fluorophore (lambda(em) = 444 nm) and had a reduced affinity for mantGTP. Trp-332, situated near the catalytic center and the nucleotide-binding area of TG2, may be part of the allosteric relay machinery that transmits negative effector signals from nucleotide binding to the active center of TG2. A most important observation was that, whereas no enzyme activity could be detected when Trp-241 was replaced with Ala or Gln, partial preservation of catalytic activity was seen with substitutions by Tyr > Phe > His. The results indicate that Trp-241 is essential for catalysis, possibly by stabilizing the transition states by H-bonding, quadrupole-ion, or van der Waals interactions. This contrasts with the evolutionarily related papain family of cysteine proteases, which uses Gln-19 (papain) for stabilizing the transition state.