Fatty acid amide hydrolase (FAAH) is a serine hydrolase responsible for the degradation of anandamide, an endogenous cannabinoid agonist, and oleamide, a sleep-inducing lipid. Recently, Boger and co-workers reported a potent, selective, and efficacious class of reversible alpha-ketoheterocycle inhibitors of FAAH that produce analgesia in animal models (J. Med. Chem. 2005, 48, 1849-1856; Bioorg. Med. Chem. Lett. 2005, 15, 1423-1428). Key aspects of the structure-activity data are addressed here through computational analysis of FAAH inhibition using Monte Carlo (MC) simulations in conjunction with free energy perturbation (FEP) calculations. The MC/FEP simulations demonstrate that incorporation of pyridine at the C5 position of the 2-keto-oxazole and 2-keto-1,3,4-oxadiazole derivatives significantly enhances binding affinity by formation of a hydrogen-bonded array between the pyridyl nitrogen and Lys142 and Thr236. The results also attribute the activity boost upon substitution of oxazole by oxadiazole to reduced steric interactions in the active site and a lower torsional energy penalty upon binding.