Cleavage of amino-terminal octapeptides, F/L/IXXS/T/GXXXX, by mitochondrial intermediate peptidase (MIP) is typical of many mitochondrial precursor proteins imported to the matrix and the inner membrane. We previously described the molecular characterization of rat liver MIP (RMIP) and indicated a putative homolog in the sequence predicted from gene YCL57w of yeast chromosome III. A new yeast gene, MIP1, has now been isolated by screening a Saccharomyces cerevisiae genomic library with an RMIP cDNA probe. MIP1 predicts a protein of 772 amino acids (YMIP), which is 54% similar and 31% identical to RMIP and includes a putative 37-residue mitochondrial leader peptide. RMIP and YMIP contain the sequence LFHEMGHAM HSMLGRT, which includes a zinc-binding motif, HEXXH, while the predicted YCL57w protein contains a comparable sequence with a lower degree of homology. No obvious biochemical phenotype was observed in a chromosomally disrupted ycl57w mutant. In contrast, a mip1 mutant was unable to grow on nonfermentable substrates, while a mip1 ycl57w double disruption did not result in a more severe phenotype. The mip1 mutant exhibited defects of complexes III and IV of the respiratory chain, caused by failure to carry out the second MIP-catalyzed cleavage of the nuclear-encoded precursors for cytochrome oxidase subunit IV (CoxIV) and the iron-sulfur protein (Fe-S) of the bc1 complex to mature proteins. In vivo, intermediate-size CoxIV was accumulated in the mitochondrial matrix, while intermediate-size Fe-S was targeted to the inner membrane. Moreover, mip1 mitochondrial fractions failed to carry out maturation of the human ornithine transcarbamylase intermediate (iOTC), specifically cleaved by RMIP. A CEN plasmid-encoded YMIP protein restored normal MIP activity along with respiratory competence. Thus, YMIP is a functional homolog of RMIP and represents a new component of the yeast mitochondrial import machinery.