The structure and functional properties of alginates are dictated by the monomer composition and molecular weight distribution. Mannuronan C-5-epimerases determine the monomer composition by catalyzing the epimerization of β-d-mannuronic acid (M) residues into α-l-guluronic acid (G) residues. The molecular weight is affected by alginate lyases, which catalyze a β-elimination mechanism that cleaves alginate chains. The reaction mechanisms for the epimerization and lyase reactions are similar, and some enzymes can perform both reactions. These dualistic enzymes share high sequence identity with mannuronan C-5-epimerases without lyase activity. The mechanism behind their activity and the amino acid residues responsible for it are still unknown. We investigate mechanistic determinants involved in the bifunctional epimerase and lyase activity of AlgE7 from Azotobacter vinelandii. Based on sequence analyses, a range of AlgE7 variants were constructed and subjected to activity assays and product characterization by nuclear magnetic resonance (NMR) spectroscopy. Our results show that calcium promotes lyase activity, whereas NaCl reduces the lyase activity of AlgE7. By using defined polymannuronan (polyM) and polyalternating alginate (polyMG) substrates, the preferred cleavage sites of AlgE7 were found to be M|XM and G|XM, where X can be either M or G. From the study of AlgE7 mutants, R148 was identified as an important residue for the lyase activity, and the point mutant R148G resulted in an enzyme with only epimerase activity. Based on the results obtained in the present study, we suggest a unified catalytic reaction mechanism for both epimerase and lyase activities where H154 functions as the catalytic base and Y149 functions as the catalytic acid. IMPORTANCE Postharvest valorization and upgrading of algal constituents are promising strategies in the development of a sustainable bioeconomy based on algal biomass. In this respect, alginate epimerases and lyases are valuable enzymes for tailoring the functional properties of alginate, a polysaccharide extracted from brown seaweed with numerous applications in food, medicine, and material industries. By providing a better understanding of the catalytic mechanism and of how the two enzyme actions can be altered by changes in reaction conditions, this study opens further applications of bacterial epimerases and lyases in the enzymatic tailoring of alginate polymers.