The clinical efficacy of the antidiabetic drug acarbose is hampered by degradation by the acarbose-preferred glucosidase (Apg) from K. grimontii TD1. Understanding the catalytic mechanism of Apg can aid the design of next-generation hypoglycemic pharmaceuticals acarbose analogs. Here, we determine several crystal structures of Apg to identify the catalytic residues and the ligand-binding pocket of Apg. Structural analyses and computational modeling reveal D448 as the active nucleophile, contrasting with prior studies that assumed D336 to be the nucleophile. In addition to E373 proposed as the proton donor in previous reports, we find that R334 might be an alternative proton donor. Our experimental and computational analyses indicate the two-ring product acarviosine is the two-step hydrolyzed product, where the second hydrolysis is the rate-limiting step. Additionally, further investigation of the acarbose analogs acarstatins A and B that are resistant to Apg is conducted by computational analysis. Overall, our studies provide perspectives into the intricacies of Apg's catalytic mechanism, contributing to the design of next-generation hypoglycemic pharmaceuticals.