Aspartic proteinase A from yeast is specifically and potently inhibited by a small protein called IA3 from Saccharomyces cerevisiae . Although this inhibitor consists of 68 residues, we show that the inhibitory activity resides within the N-terminal half of the molecule. Structures solved at 2.2 and 1.8 Å, respectively, for complexes of proteinase A with full-length IA3 and with a truncated form consisting only of residues 2–34, reveal an unprecedented mode of inhibitor–enzyme interactions. Neither form of the free inhibitor has detectable intrinsic secondary structure in solution. However, upon contact with the enzyme, residues 2–32 become ordered and adopt a near-perfect α-helical conformation. Thus, the proteinase acts as a folding template, stabilizing the helical conformation in the inhibitor, which results in the potent and specific blockage of the proteolytic activity.