This investigation of the temperature dependence of DppA interactions with a subset of three dipeptides (AA. AF and FA) by isothermal titration calorimetry has revealed the negative heat capacity ([Formula: see text]) that is a characteristic of hydrophobic interactions. The observation of enthalpy-entropy compensation is interpreted in terms of the increased structuring of water molecules trapped in a hydrophobic environment, the enthalpic energy gain from which is automatically countered by the entropy decrease associated with consequent loss of water structure flexibility. Specificity for dipeptides stems from appropriate spacing of designated DppA aspartate and arginine residues for electrostatic interaction with the terminal amino and carboxyl groups of a dipeptide, after which the binding pocket closes to become completely isolated from the aqueous environment. Any differences in chemical reactivity of the dipeptide sidechains are thereby modulated by their occurrence in a hydrophobic environment where changes in the structural state of entrapped water molecules give rise to the phenomenon of enthalpy-entropy compensation. The consequent minimization of differences in the value of ΔG0 for all DppA-dipeptide interactions thus provides thermodynamic insight into the biological role of DppA as a transporter of all dipeptides across the periplasmic membrane.