The delta-opioid antagonist H-Tyr-Tic Psi[CH2-NH]Phe-OH (TIP[Psi], Tic = tetrahydroisoquinoline-3-carboxylic acid) was shown to undergo spontaneous formation of N-(Mti)-Phe-Tyr diketopiperazine (Mti = [(3’S)-tetrahydroisoquinolinyl] methyl) in DMSO and MeOH but not in aqueous solution or DMSO:H2O solvent mixtures which were at least 20% water. The reaction mechanism proposed for the diketopiperazine formation involves amide bond formation between the N and C terminal groups of the nonactivated linear tripeptide, followed by transannular nucleophilic attack of the Tyr carbonyl group by the secondary amine. Molecular mechanics calculations carried out on TIP[Psi] revealed low-energy structures available to the molecule in which the carboxyl and amino terminal functions are within a distance suitable for nucleophilic attack (2.8 Angstrom), The rate of diketopiperazine formation was shown to be dependent on both sample pH and nucleophilicity of the terminal peptide amino group. Reaction intermediates or additional compounds in tautomeric equilibria with the diketopiperazine were not observed during the HPLC analyses or NMR investigations. The diketopiperazine obtained from TIP[Psi] was isolated and structurally characterized by H-1 NMR spectroscopy in conjunction with molecular modeling. According to H-1 NMR coupling constants, several orientations of the side chains around the diketopiperazine ring are possible. Large chemical shift displacements from expected values observed for the Tyr beta and Mti methylene protons are explained in terms of ring current effects manifested by aromatic interactions which stabilize the low-energy structures. The calculated diketopiperazine ring structure is slightly puckered out of plane by -5 degrees to -15 degrees.