Neostigmine is a competitive reversible inhibitor of acetylcholinesterase. When the drug interacts with the serine of the enzyme's active site, a nucleophilic substitution reaction takes place where the drug loses a phenol group leading to the formation of a stable intermediate. However, serine then gets capped by a stable urethane group. Hydrolysis then occurs preventing "aging" from happening. The serine will then return to its normal form so this inhibition is reversible.
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Neostigmine contains an ester functional group and a quaternary nitrogen with a positive charge. Meanwhile, the active site of the acetylcholinesterase has a serine residue and an anionic site. The ester functional group can hence form a hydrogen bond with the serine residue and the quaternary nitrogen can be electrostatically attracted to the anionic site. In addition, neostigmine may also contain methyl groups which fit into the enzyme's hydrophobic spaces. Neostigmine can hence inhibit acetylcholinesterase in a reversible manner.