The mitochondrial intermediate peptidase (MIP) cleaves characteristic octapeptides, (F/L/I)XX(T/S/ G)XXXX(decreases), from the N-terminus of many imported mitochondrial proteins. This leader peptidase is activated by divalent cations and inactivated by thiol-blocking agents, properties which are typical of metallo- and cysteine-proteases, respectively. To elucidate the mechanism of action of MIP, we analyzed by site-directed mutagenesis the functional role of a putative zinc-binding domain (F-H-E-X-G-H-(X)2-H-(X)12-G-(X)5-D-(X)2-E-X-P-S-(X)3-E) and two cysteine residues (C131 and C581), which are highly conserved in evolutionarily distant MIP sequences. We show that two histidines and a glutamic acid in the H-E-X-G-H motif and a glutamic acid 25 residues from the second histidine are essential for MIP function in vivo. In contrast, C131 and C581 are important for protein stability but are not required for activity in vivo or in vitro. These findings are consistent with MIP being a metallopeptidase.