An increased reaction rate for lipase catalyzed N-acylation of amino alcohols compared to monofunctionalized amines can be explained by a hydrogen shuffling mechanism that avoids nitrogen inversion in the transition state. The mechanism does not involve acyl migration from an ester intermediate which would be formed first, an explanation that permeates the literature. Our suggested reaction mechanism is dependent on the preference of amino alcohols to form intramolecular hydrogen bonds and the capability of the enzyme to accommodate and exploit the specific hydrogen bonding pattern provided by the ligand during catalysis. Our proposed proton shuttle mechanism involves the transfer of two protons in the transition state concomitant with nucleophilic attack on the acyl enzyme and provides an explanation to the high reaction rate and chemoselectivity for lipase catalyzed N-acylation of amino alcohols. Moreover the proton shuttle mechanism explains the increased reaction rate for the enzyme catalyzed N-acylation of diamines and of methoxy-2-propylamine for which O- to N-acyl migration is impossible. A Linear Free Energy Relationship (LFER) analysis based on the experimental results showed that all of our investigated difunctionalized amine substrates afforded a substrate assisted rate acceleration of N-acylation by the same reaction mechanism. Furthermore the LFER analysis was consistent with partial proton transfer in the rate limiting transition state which further supports our suggested proton shuttle mechanism.