The angiotensin-converting enzyme (ACE) exhibits critical functions in the conversion of angiotensin I to angiotensin II and the degradation of bradykinin and other vasoactive peptides. As a result, the ACE inhibition has become a promising approach in the treatment of hypertension, heart failure, and diabetic nephropathy. Extending our recent molecular dynamics simulation of the testis ACE in complex with a bona fide substrate molecule, hippuryl-histidyl-leucine, we presented here a detailed investigation of the hydrolytic process and possible influences of the chloride ion on the reaction using a combined quantum mechanical and molecule mechanical method. Similar to carboxypeptidase A and thermolysin, the promoted water mechanism is established for the catalysis of ACE. The E384 residue was found to have the dual function of a general base for activating the water nucleophile and a general acid for facilitating the cleavage of amide C-N bond. Consistent with experimental observations, the chloride ion at the second binding position is found to accelerate the reaction rate presumably due to the long-range electrostatic interactions but has little influence on the overall substrate binding characteristics.