The chloroplastic drought-induced stress protein of 32 kD (CDSP32) is composed of two thioredoxin modules and is induced by environmental and oxidative stress conditions. We investigated whether the plastidic protein BAS1, which is related to eubacterial 2-Cys peroxiredoxin, is a target for CDSP32. Using a CDSP32 active-site mutant, we showed that the BAS1 and CDSP32 proteins form a mixed disulfide complex in vitro. Moreover, affinity chromatography indicated that BAS1 is a major target for CDSP32 in chloroplasts. CDSP32 was able to reduce BAS1 in vitro, and BAS1 displayed CDSP32-dependent peroxidase activity. The function of CDSP32 was investigated in transgenic potato lines without detectable levels of the protein as a result of cosuppression. Under conditions of photooxidative stress induced by incubation with either methyl viologen or t-butyl hydroperoxide or by exposure to low temperature under high light, plants lacking CDSP32 exhibited decreased maximal photosystem II photochemical efficiencies compared with the wild type and transgenic controls. In addition, plants without CDSP32 retained much less chlorophyll than controls under stress, indicating increased damage to photosynthetic membranes. We conclude that CDSP32 is a thioredoxin with a critical role in plastid defense against oxidative damage and that this role is related to its function as a physiological electron donor to the BAS1 peroxiredoxin.