The crystal structure of recombinant murine liver cytosolic epoxide hydrolase (EC 3.3.2.3) has been determined at 2.8-A resolution. The binding of a nanomolar affinity inhibitor confirms the active site location in the C-terminal domain; this domain is similar to that of haloalkane dehalogenase and shares the alpha/beta hydrolase fold. A structure-based mechanism is proposed that illuminates the unique chemical strategy for the activation of endogenous and man-made epoxide substrates for hydrolysis and detoxification. Surprisingly, a vestigial active site is found in the N-terminal domain similar to that of another enzyme of halocarbon metabolism, haloacid dehalogenase. Although the vestigial active site does not participate in epoxide hydrolysis, the vestigial domain plays a critical structural role by stabilizing the dimer in a distinctive domain-swapped architecture. Given the genetic and structural relationships among these enzymes of xenobiotic metabolism, a structure-based evolutionary sequence is postulated.