A number of mutants with pleiotropic effects on mitochondrial metabolism have been isolated in yeast Saccharomyces cerevisiae, and for many the biochemical function that is impaired is not yet known. We report here the isolation and characterization of the LIP5 gene involved in lipoic acid metabolism which complements the g189 mutant (Tzagoloff, A., and Dieckmann, C. L. (1990) Microbiol. Rev. 54, 211-225). DNA sequence analysis of complementing yeast genomic DNA revealed an open reading frame predicting a protein of 414 amino acids. The protein sequence deduced from the gene shares 43% identical residues with the product of the Escherichia coli lip gene, which codes an enzyme involved in lipoic acid synthesis. The LIP5 mutant is not capable of synthesizing lipoic acid but still possesses the activity necessary for attachment of lipoic acid to protein. Relative to the E. coli lip gene product, the LIP5 protein has an amino-terminal extension with characteristics of mitochondrial targeting signals. Cells carrying a disrupted copy of the LIP5 gene show slow growth on ethanol-rich media and barely detectable growth on glycerol-rich media. Unlike other strains with defects in the tricarboxylic acid cycle, LIP5 mutants undergo a high frequency of mitochondrial DNA deletions.