Vildagliptin is a member of a new class of oral anti-diabetic drug. One unknown impurity was identified in the range of 0.01–0.06% in different laboratory batches of vildagliptin along with known impurities by HPLC analysis. The structure of unknown impurity was proposed as (2S)-1-[2-[(3-hydroxyadamantan-1-yl)imino]acetyl]pyrrolidine-2-carbonitrile (Impurity-E) using LC/ESI–MSn study. The unknown impurity was found to be unstable in diluent (H2O:CH3CN) and degrading into another stable impurity. The degraded stable impurity was isolated from enriched reaction crude sample by semi preparative liquid chromatography. The structure of stable impurity was established using FT-IR, NMR (1H, 13C and DEPT), 2D NMR (HSQC, HMBC and COSY) and mass spectral data as (8aS)-3-hydroxy-octahydropyrrolo[1,2-a]piperazine-1,4-dione (Impurity-F). Impurity identification, abnormal behaviour of impurity-E, isolation of impurity-F, fragmentation mechanism and structural elucidation were also discussed.