Detailed kinetic studies on the hydrolysis of glycylglycine (Gly-Gly) in the presence of the dimeric tetrazirconium(IV)-substituted Wells–Dawson-type polyoxometalate Na14[Zr4(P2W16O59)2(μ3-O)2(OH)2(H2O)4]·57H2O (1) were performed by a combination of 1H, 13C, and 31P NMR spectroscopies. The catalyst was shown to be stable under a broad range of reaction conditions. The effect of pD on the hydrolysis of Gly-Gly showed a bell-shaped profile with the fastest hydrolysis observed at pD 7.4. The observed rate constant for the hydrolysis of Gly-Gly at pD 7.4 and 60 °C was 4.67 × 10–7 s–1, representing a significant acceleration as compared to the uncatalyzed reaction. 13C NMR data were indicative for coordination of Gly-Gly to 1 via its amide oxygen and amine nitrogen atoms, resulting in a hydrolytically active complex. Importantly, the effective hydrolysis of a series of Gly-X dipeptides with different X side chain amino acids in the presence of 1 was achieved, and the observed rate constant was shown to be dependent on the volume, chemical nature, and charge of the X amino acid side chain. To give a mechanistic explanation of the observed catalytic hydrolysis of Gly-Gly, a detailed quantum-chemical study was performed. The theoretical results confirmed the nature of the experimentally suggested binding mode in the hydrolytically active complex formed between Gly-Gly and 1. To elucidate the role of 1 in the hydrolytic process, both the uncatalyzed and the polyoxometalate-catalyzed reactions were examined. In the rate-determining step of the uncatalyzed Gly-Gly hydrolysis, a carboxylic oxygen atom abstracts a proton from a solvent water molecule and the nascent OH nucleophile attacks the peptide carbon atom. Analogous general-base activity of the free carboxylic group was found to take place also in the case of polyoxometalate-catalyzed hydrolysis as the main catalytic effect originates from the −C═O···Zr(IV) binding.