Friedreich's ataxia (FRDA) is a neurodegenerative disease typically caused by a deficiency of frataxin, a mitochondrial protein of unknown function. In Saccharomyces cerevisiae, lack of the yeast frataxin homolog ( YFH1 gene, Yfh1p polypeptide) results in mitochondrial iron accumulation, suggesting that frataxin is required for mitochondrial iron homeostasis and that FRDA results from oxidative damage secondary to mitochondrial iron overload. This hypothesis implies that the effects of frataxin deficiency could be influenced by other proteins involved in mitochondrial iron usage. We show that Yfh1p interacts functionally with yeast mitochondrial intermediate peptidase ( OCT1 gene, YMIP polypeptide), a metalloprotease required for maturation of ferrochelatase and other iron-utilizing proteins. YMIP is activated by ferrous iron in vitro and loss of YMIP activity leads to mitochondrial iron depletion, suggesting that YMIP is part of a feedback loop in which iron stimulates maturation of YMIP substrates and this in turn promotes mitochondrial iron uptake. Accordingly, YMIP is active and promotes mitochondrial iron accumulation in a mutant lacking Yfh1p ( yfh1 [Delta]), while genetic inactivation of YMIP in this mutant ( yfh1 [Delta] oct1 [Delta]) leads to a 2-fold reduction in mitochondrial iron levels. Moreover, overexpression of Yfh1p restores mitochondrial iron homeostasis and YMIP activity in a conditional oct1 ts mutant, but does not affect iron levels in a mutant completely lacking YMIP ( oct1 [Delta]). Thus, we propose that Yfh1p maintains mitochondrial iron homeostasis both directly, by promoting iron export, and indirectly, by regulating iron levels and therefore YMIP activity, which promotes mitochondrial iron uptake. This suggests that human MIP may contribute to the functional effects of frataxin deficiency and the clinical manifestations of FRDA.