The yeast Saccharomyces cerevisiae contains two glutaredoxins, encoded by GRX1 and GRX2, that are required for resistance to reactive oxygen species. We recently reported that Grx1 is active as a glutathione peroxidase and can directly reduce hydroperoxides (Collinson, E. J., Wheeler, G. L., Garrido, E. O., Avery, A. M., Avery, S. V., and Grant, C. M. (2002) J. Biol. Chem. 277, 16712-16717). We now show that Grx2 is also a general hydroperoxidase, and kinetic data indicate that both enzymes have a similar pattern of activity, which is highest with hydrogen peroxide, followed by cumene hydroperoxide and tert-butyl hydroperoxide. Furthermore, both Grx1 and Grx2 are shown be active as glutathione S-transferases (GSTs), and their activity with model substrates such as 1-chloro-2,4-dinitrobenzene is similar to their activity with hydroperoxides. Analysis of the Grx1 active site residues shows that Cys-27, but not Cys-30, is required for both the peroxidase and transferase activities, indicating that these reactions proceed via a monothiol mechanism. Deletion analysis shows that Grx1 and Grx2 have an overlapping function with yeast GSTs, encoded by GTT1 and GTT2, and are responsible for the majority of cellular GST activity. In addition, multiple mutants lacking GRX1, GRX2, GTT1, and GTT2 show increased sensitivity to stress conditions, including exposure to xenobiotics, heat, and oxidants. In summary, glutaredoxins are multifunctional enzymes with oxidoreductase, peroxidase, and GST activity, and are therefore ideally suited to detoxify the wide range of xenobiotics and oxidants that can be generated during diverse stress conditions.