Transglutaminase 2 (TG2) catalyzes cross-linking or deamidation of glutamine 
residues in peptides and proteins. The in vivo deamidation of gliadin peptides 
plays an important role in the immunopathogenesis of celiac disease (CD). 
Although deamidation is considered to be a side-reaction occurring in the 
absence of suitable amines or at a low pH, a recent paper reported the selective 
deamidation of the small heat shock protein 20 (Hsp20), suggesting that 
deamidation could be a substrate dependent event. Here we have measured peptide 
deamidation and transamidation in the same reaction to reveal factors that 
affect the relative propensity for the two possible products. We report that the 
propensity for deamidation by TG2 is both substrate dependent and influenced by 
the reaction conditions. Direct deamidation is favored for poor substrates and 
at low concentrations of active TG2, while indirect deamidation (i.e. hydrolysis 
of transamidated product) can significantly contribute to the deamidation of 
good peptide substrates at higher enzyme concentrations. Further, we report for 
the first time that TG2 can hydrolyze iso-peptide bonds between two peptide 
substrates. This was observed also for gliadin peptides introducing a novel 
route for the generation of deamidated T cell epitopes in celiac disease.