X-linked inhibitor of apoptosis protein (XIAP) inhibits apoptosis mainly through inhibition of caspase-9 and executioner caspases of -3 and -7. The inhibition of the former protease is implemented through the bacculoviral inhibitory repeat-3 (Bir3) domain, while the inhibition of the latter is accomplished by the interaction of the linker region located between the Bir1 and the Bir2 domains with their active sites. Both modes of inhibition are antagonized by SMAC, which is released from mitochondria during the initiation of the intrinsic apoptosis pathway. Although the mechanism of SMAC interference in Bir3 inhibition of caspase-9 is clearly established, the mechanism by which SMAC interferes with the inhibition of the executioner caspases by XIAP remains largely unknown. To address this issue, we performed a limited proteolysis of glutathione S-transferase (GST)-tagged XIAP-Bir2 by trypsin in the presence and in the absence of SMAC peptide. Under these conditions, the proteolysis of the linker region was diminished considerably. Furthermore, the rate of association of caspase-3 and -7 with XIAP in the presence of the SMAC peptide was reduced drastically, suggesting that SMAC peptide restricts the exposure of the linker region. A limited proteolysis of caspase-7 in the presence of GST-Bir2 and GST-NBir3 (the Bir3 domain of human NAIP) as negative controls was also performed. Matrix-assisted laser desorption/ionization time-of-flight analysis of the fragments revealed the identity of protected sites, suggesting that the Bir2 domain makes numerous contacts with the large subunit of caspase-7. These, combined with the results from Far-Western experiments, strongly suggest that the groove for the inhibitor(s)-of-apoptosis-protein-binding motif on the Bir2 favors binding to the N-terminus of the large subunit rather than to the small subunit of caspase-7. Our results further show that the active-site pocket of caspase-7 is first occupied by the linker region, followed by the interaction of the N-terminus of the enzyme with the SMAC-binding site of the Bir2 domain.