Mgm1p is a conserved dynamin-related GTPase required for fusion, morphology, inheritance, and the genome maintenance of mitochondria in Saccharomyces cerevisiae. Mgm1p undergoes unconventional processing to produce two functional isoforms by alternative topogenesis. Alternative topogenesis involves bifurcate sorting in the inner membrane and intramembrane proteolysis by the rhomboid protease Pcp1p. Here, we identify Ups1p, a novel mitochondrial protein required for the unique processing of Mgm1p and for normal mitochondrial shape. Our results demonstrate that Ups1p regulates the sorting of Mgm1p in the inner membrane. Consistent with its function, Ups1p is peripherally associated with the inner membrane in the intermembrane space. Moreover, the human homologue of Ups1p, PRELI, can fully replace Ups1p in yeast cells. Together, our findings provide a conserved mechanism for the alternative topogenesis of Mgm1p and control of mitochondrial morphology.