The mitochondrial processing peptidase (MPP) and the processing enhancing protein (PEP) cooperate in the proteolytic cleavage of matrix targeting sequences from nuclear-encoded mitochondrial precursor proteins. We have determined the cDNA sequence of Neurospora MPP after expression cloning. MPP appears to contain two domains of approximately equal size which are separated by a loop-like sequence. Considerable structural similarity exists to the recently sequenced yeast MPP as well as to Neurospora and yeast PEP. Four cysteine residues are conserved in Neurospora and yeast MPP. Inactivation of MPP can be achieved by using sulfhydryl reagents. MPP (but not PEP) depends on the presence of divalent metal ions for activity. Both MPP and PEP are synthesized as precursors containing matrix targeting signals which are processed during import into mitochondria by the mature forms of MPP and PEP.