PaaI thioesterases are members of the TE13 thioesterase family that catalyze the hydrolysis of thioester bonds between coenzyme A and phenylacetyl-CoA. In this study we characterize the PaaI thioesterase from Streptococcus pneumoniae (SpPaaI), including structural analysis based on crystal diffraction data to 1.8-Å resolution, to reveal two double hotdog domains arranged in a back to back configuration. Consistent with the crystallography data, both size exclusion chromatography and small angle x-ray scattering data support a tetrameric arrangement of thioesterase domains in solution. Assessment of SpPaaI activity against a range of acyl-CoA substrates showed activity for both phenylacetyl-CoA and medium-chain fatty-acyl CoA substrates. Mutagenesis of putative active site residues reveals Asn37, Asp52, and Thr68 are important for catalysis, and size exclusion chromatography analysis and x-ray crystallography confirm that these mutants retain the same tertiary and quaternary structures, establishing that the reduced activity is not a result of structural perturbations. Interestingly, the structure of SpPaaI in the presence of CoA provides a structural basis for the observed substrate specificity, accommodating a 10-carbon fatty acid chain, and a large conformational change of up to 38 Å in the N terminus, and a loop region involving Tyr38-Tyr39. This is the first time PaaI thioesterases have displayed a dual specificity for medium-chain acyl-CoAs substrates and phenylacetyl-CoA substrates, and we provide a structural basis for this specificity, highlighting a novel induced fit mechanism that is likely to be conserved within members of this enzyme family.