Previous studies have indicated that the essential protein Nfs1 performs a crucial role in cellular iron-sulfur (Fe/S) protein maturation. The protein is located predominantly in mitochondria, yet low amounts are present in cytosol and nucleus. Here we examined several aspects concerning the molecular function of yeast Nfs1p as a model protein. First, we demonstrated that purified Nfs1p facilitates the in vitro assembly of Fe/S proteins by using cysteine as its specific substrate. Thus, eukaryotic Nfs1 is a functional orthologue of the bacterial cysteine desulfurase IscS. Second, we showed that only the mitochondrial version but not the extramitochondrial version of Nfs1p is functional in generating cytosolic and nuclear Fe/S proteins. Mutation of the nuclear targeting signal of Nfs1p did not affect the maturation of cytosolic and nuclear Fe/S proteins, despite a severe growth defect under this condition. Nfs1p could not assemble an Fe/S cluster on the Isu scaffold proteins when they were located in the yeast cytosol. The lack of function of these central Fe/S cluster assembly components suggests that the maturation of extramitochondrial Fe/S protein does not involve functional copies of the mitochondrial Fe/S cluster assembly machinery in the yeast cytosol. Third, the extramitochondrial version of Nfs1p was shown to play a direct role in the thiomodification of tRNAs. Finally, we identified a highly conserved N-terminal beta-sheet of Nfs1p as a functionally essential part of the protein. The implication of these findings for the structural stability of Nfs1p and for its targeting mechanism to mitochondria and cytosol/nucleus will be discussed.