Bacillus subtilis PdaC (BsPdaC) is a membrane-bound, multidomain peptidoglycan N-deacetylase acting on N-acetylmuramic acid (MurNAc) residues and conferring lysozyme resistance to modified cell wall peptidoglycans. BsPdaC contains a C-terminal family 4 carbohydrate esterase (CE4) catalytic domain, but unlike other MurNAc deacetylases, BsPdaC also has GlcNAc deacetylase activity on chitooligosaccharides (COSs), characteristic of chitin deacetylases. To uncover the molecular basis of this dual activity, here we determined the X-ray structure of the BsPdaC CE4 domain at 1.54 Å resolution and analyzed its mode of action on COS substrates. We found that the minimal substrate is GlcNAc3 and that activity increases with the degree of glycan polymerization. COS deacetylation kinetics revealed that BsPdaC operates by a multiple-chain mechanism starting at the internal GlcNAc units and leading to deacetylation of all but the reducing-end GlcNAc residues. Interestingly, BsPdaC shares higher sequence similarity with the peptidoglycan GlcNAc deacetylase SpPgdaA than with other MurNAc deacetylases. Therefore, we used ligand-docking simulations to analyze the dual GlcNAc- and MurNAc-binding specificities of BsPdaC and compared them with those of SpPgdA and BsPdaA, representing peptidoglycan deacetylases highly specific for GlcNAc or MurNAc residues, respectively. BsPdaC retains the conserved Asp-His-His metal-binding triad characteristic of CE4 enzymes acting on GlcNAc residues, differing from MurNAc deacetylases that lack the metal-coordinating Asp residue. BsPdaC contains short loops similar to those in SpPgdA, resulting in an open binding cleft that can accommodate polymeric substrates. We propose that PdaC is the first member of a new subclass of peptidoglycan MurNAc deacetylases.