The mitochondrial matrix enzyme malate dehydrogenase (MDH) is synthesized on cytoplasmic polysomes as a larger precursor (pMDH) with an NH2-terminal leader peptide of 24 amino acids. Import of in vitro synthesized MDH into mitochondria results in formation of the mature-sized subunit. We report here that the conversion of pMDH to mMDH occurs via two distinct cleavage events within the leader peptide. First, pMDH is cleaved to an intermediate form (iMDH) of MDH. Conversion of the precursor to the intermediate form is catalyzed by a protease localized to the mitochondrial matrix. The cleavage of pMDH to iMDH involves the removal of 15 amino acids from the NH2 terminus of the pMDH leader peptide. The iMDH is subsequently cleaved, also by a matrix protease, to mature MDH in a reaction which is O-phenanthroline-sensitive. Cleavage to iMDH and to mature MDH occurs prior to completion of translocation of the MDH polypeptide chain into the mitochondrial matrix.