Herein, we combined classical molecular dynamics (MD) and quantum mechanical/molecular mechanics (QM/MM) simulations to unravel the whole catalytic cycle of fatty acid amide hydrolase (FAAH) in complex with anandamide, the main neurotransmitters involved in the control of pain. While microsecond MD simulations of FAAH in a realistic membrane/water environment provided a solid model for the reactant state of the enzymatic complex (Palermo et al. J. Chem. Theory Comput. 2013, 9, 12021213.), QM/MM simulations depict now a highly concerted two-step catalytic mechanism characterized by (1) acyl-enzyme formation after hydrolysis of the substrate amide bond and (2) deacylation reaction with restoration of the catalytic machinery. We found that a crucial event for anandamide hydrolysis is the inversion of the reactive nitrogen of the scissile amide bond, which occurs during the acylation rate-limiting step. We show that FAAH uses an exquisite catalytic strategy to induce amide bond distortion, reactive nitrogen inversion, and amide bond hydrolysis, promoting catalysis to completion. This new strategy is likely to be of general applicability to other amidases/peptidases that show similar catalytic site architectures, providing crucial insights for de novo enzyme design or drug discovery efforts.