Ubiquitin (Ub) activation by the Ub-activating (E1) enzyme is the initial and essential step common to all of the known processes that involve post-translational conjugation of Ub to itself or other proteins. The "activated" Ub, linked via a thioester bond to a specific cysteine residue in one of several Ub-conjugating (E2) enzymes, which catalyze the formation of isopeptide bonds between the C-terminal glycine of Ub and lysine residues of acceptor proteins. In the yeast Saccharomyces cerevisiae, a 114-kDa E1 enzyme is encoded by an essential gene termed UBA1 (McGrath, J.P., Jentsch, S., and Varshavsky, A. (1991) EMBO J. 10, 227-236). We describe the isolation and analysis of another essential gene, termed UBA2, that encodes a 71-kDa protein with extensive sequence similarities to both the UBA1-encoded yeast E1 and E1 enzymes of other organisms. The regions of similarities between Uba1p and Uba2p encompass a putative ATP-binding site as well as a sequence that is highly conserved between the known E1 enzymes and contains the active-site cysteine of E1. This cysteine is shown to be required for an essential function of Uba2p, suggesting that Uba2p-catalyzed reactions involved a transient thioester bond between Uba2p and either Ub or another protein. Uba2p is located largely in the nucleus. The putative nuclear localization signal of Uba2p is near its C terminus. The Uba1p (E1 enzyme) and Uba2p cannot complement each others essential functions even if their subcellular localization is altered by mutagenesis. Uba2p appears to interact with itself and several other S. cerevisiae proteins with apparent molecular masses of 52, 63, 87, and 120 kDa. Uba2p is multiubiquitinated in vivo, suggesting that at least a fraction of Uba2p is metabolically unstable. Uba2p is likely to be a component of the Ub system that functions as either an E2 or E1/E2 enzyme.