Lung disease in alpha-1-antitrypsin deficiency (AATD) results from dysregulated proteolytic activity, mainly by neutrophil elastase (HNE), in the lung parenchyma. This is the result of a substantial reduction of circulating alpha-1-antitrypsin (AAT) and the presence in the plasma of inactive polymers of AAT. Moreover, some AAT mutants have reduced intrinsic activity toward HNE, as demonstrated for the common Z mutant, as well as for other rarer variants. Here we report the identification and characterisation of the novel AAT reactive centre loop variant Gly349Arg (p.G373R) present in the ExAC database. This AAT variant is secreted at normal levels in cellular models of AATD but shows a severe reduction in anti-HNE activity. Biochemical and molecular dynamics studies suggest it exhibits unfavourable RCL presentation to cognate proteases and compromised insertion of the RCL into β-sheet A. Identification of a fully dysfunctional AAT mutant that does not show a secretory defect underlines the importance of accurate genotyping of patients with pulmonary AATD manifestations regardless of the presence of normal levels of AAT in the circulation. This subtype of disease is reminiscent of dysfunctional phenotypes in anti-thrombin and C1-inibitor deficiencies so, accordingly, we classify this variant as the first pure functionally-deficient (type II) AATD mutant.