Arginine metabolism plays a key role in the energy metabolism of the intestinal parasite Giardia duodenalis, an amitochondrial protozoan that infects humans and animals and causes significant morbidity. An arginine deiminase (ADI) has been implicated in virulence, but it is currently unknown if ADI allele variants from the different genetic G. duodenalis subgroups (assemblages) differ in function. Here, the hypothesis was tested that sequence variation detected between G. duodenalis ADI alleles from the two G. duodenalis assemblage types found in humans affects functional parameters of the enzyme with potential consequences in life cycle progression. The ADI enzyme affinity for arginine was drastically reduced in sub-assemblage AII isolates, a human specific assemblage, in comparison to zoonotic sub-assemblage AI and B isolates. We identified the two amino acid residues responsible for the lower substrate affinity of ADIAII variant. Using genetic approaches to generate ADI knockout mutants, biochemical approaches to unravel substrate affinity as well as cellular approaches to determine efficiency of life cycle progression, we show that ADI is essential for efficient encystation of the parasite and that the lower substrate affinity in ADIAII correlates with lower encystation efficiency. We further demonstrate that arginine is essential for efficient encystation, and by generating ADI knock-out parasites we present evidence that ADI is the functional correlate for this arginine dependence. Thus, our data describe ADI as a quantitative trait that affects life cycle progression of G. duodenalis with putative clinical and epidemiological relevance.