Tularemia is a deadly, febrile disease caused by infection by the gram-negative bacterium, Francisella tularensis. Members of the ubiquitous serine hydrolase protein family are among current targets to treat diverse bacterial infections. Herein we present a structural and functional study of a novel bacterial carboxylesterase (FTT258) from F. tularensis, a homologue of human acyl protein thioesterase (hAPT1). The structure of FTT258 has been determined in multiple forms, and unexpectedly large conformational changes of a peripheral flexible loop occur in the presence of a mechanistic cyclobutanone ligand. The concomitant changes in this hydrophobic loop and the newly exposed hydrophobic substrate binding pocket suggest that the observed structural changes are essential to the biological function and catalytic activity of FTT258. Using diverse substrate libraries, site-directed mutagenesis, and liposome binding assays, we determined the importance of these structural changes to the catalytic activity and membrane binding activity of FTT258. Residues within the newly exposed hydrophobic binding pocket and within the peripheral flexible loop proved essential to the hydrolytic activity of FTT258, indicating that structural rearrangement is required for catalytic activity. Both FTT258 and hAPT1 also showed significant association with liposomes designed to mimic bacterial or human membranes, respectively, even though similar structural rearrangements for hAPT1 have not been reported. The necessity for acyl protein thioesterases to have maximal catalytic activity near the membrane surface suggests that these conformational changes in the protein may dually regulate catalytic activity and membrane association in bacterial and human homologues.