Substrate-assisted catalysis (SAC) is the process by which a functional group in a substrate contributes to catalysis by an enzyme. SAC has been demonstrated for representatives of three major enzyme classes: serine proteases, GTPases, and type II restriction endonucleases, as well as lysozyme and hexose-1-phosphate uridylyltransferase. Moreover, structure-based predictions of SAC have been made for many additional enzymes. Examples of SAC include both naturally occurring enzymes such as type II restriction endonucleases as well as engineered enzymes including serine proteases. In the latter case, a functional group from a substrate can substitute for a catalytic residue replaced by site-directed mutagenesis. From a protein engineering perspective, SAC provides a strategy for drastically changing enzyme substrate specificity or even the reaction catalyzed. From a biological viewpoint, SAC contributes significantly to the activity of some enzymes and may represent a functional intermediate in the evolution of catalysis. This review focuses on advances in engineering enzyme specificity and activity by SAC, together with the biological significance of this phenomenon.