The matrix of yeast mitochondria contains a chelator-sensitive protease that removes matrix-targeting signals from most precursor proteins transported into this compartment. The enzyme consists of two nonidentical subunits that are encoded by the nuclear genes MAS1 and MAS2. With the aid of these cloned genes, we have now overexpressed the active holoenzyme in yeast, purified it in milligram amounts, and studied its biochemical and physical properties. Atomic absorption analysis shows that the purified enzyme lacks significant amounts of zinc, manganese, or cobalt; if none of these metal ions is added during the assay, the enzyme is catalytically inactive but can still cleave substoichiometric amounts of substrate. The amino-terminal sequences of the two mature subunits were determined; comparison with the deduced amino acid sequences of the corresponding precursors revealed that the MAS1 and MAS2 subunits are synthesized with prepeptides composed of 19 and 13 residues, respectively, which have similar sequences. The enzyme is inhibited competitively by chemically synthesized matrix-targeting peptides; the degree of inhibition correlates with the peptides' targeting efficacy. Matrix-targeting peptides containing the cleavage site of the corresponding authentic precursor protein are cleaved correctly by the purified enzyme. A purified artificial precursor protein bound to the holoenzyme can be photocross-linked to the MAS2 subunit.