We report the development and optimization of a tetrapeptide that catalyzes the methanolytic dynamic kinetic resolution of oxazol-5(4H)-ones (azlactones) with high levels of enantioinduction. Oxazolones possessing benzylic-type substituents were found to perform better than others, providing methyl ester products in 88:12 to 98:2 er. The mechanism of this peptide-catalyzed process was investigated through truncation studies and competition experiments. High-field NOESY analysis was performed to elucidate the solution-phase structure of the peptide, and we present a plausible model for catalysis.