The virulence of anthrax stems from the shielding properties of the Bacillus anthracis poly-γ-D-glutamic acid capsule. In the presence of excess CapD, a B. anthracis γ-glutamyl transpeptidase, the protective capsule is degraded, and the immune system can successfully combat infection. Although CapD shows promise as a next generation protein therapeutic against anthrax, improvements in production, stability, and therapeutic formulation are needed. In this study, we addressed several of these problems through computational protein engineering techniques. We show that circular permutation of CapD improved production properties and dramatically increased kinetic thermostability. At 45 °C, CapD was completely inactive after 5 min, but circularly permuted CapD remained almost entirely active after 30 min. In addition, we identify an amino acid substitution that dramatically decreased transpeptidation activity but not hydrolysis. Subsequently, we show that this mutant had a diminished capsule degradation activity, suggesting that CapD catalyzes capsule degradation through a transpeptidation reaction with endogenous amino acids and peptides in serum rather than hydrolysis.