The enzyme functions by attacking, hydrolyzing, and breaking glycosidic bonds in peptidoglycans. The enzyme can also break glycosidic bonds in chitin, although not as effectively as true chitinases.

Lysozymes active site binds the peptidoglycan molecule in the prominent cleft between its two domains. It attacks peptidoglycans (found in the cell walls of bacteria, especially Gram-positive bacteria), its natural substrate, between N-acetylmuramic acid (NAM) and the fourth carbon atom of N-acetylglucosamine (NAG).

Shorter saccharides like tetrasaccharide have also shown to be viable substrates but via an intermediate with a longer chain. Chitin has also been shown to be a viable lysozyme substrate. Artificial substrates have also been developed and used in lysozyme.