Members of the Inhibitor of Apoptosis Protein (IAP) family are essential for cell survival in Drosophila and appear to neutralize the cell death machinery by binding to and ubiquitylating pro-apoptotic caspases. Cell death is triggered when "Reaper-like" proteins bind to IAPs and liberate caspases from IAPs. We have identified the thioredoxin peroxidase Jafrac2 as an IAP-interacting protein in Drosophila cells that harbours a conserved N-terminal IAP-binding motif. In healthy cells, Jafrac2 resides in the endoplasmic reticulum but is rapidly released into the cytosol following induction of apoptosis. Mature Jafrac2 interacts genetically and biochemically with DIAP1 and promotes cell death in tissue culture cells and the Drosophila developing eye. In common with Rpr, Jafrac2-mediated cell death is contingent on DIAP1 binding because mutations that abolish the Jafrac2-DIAP1 interaction suppress the eye phenotype caused by Jafrac2 expression. We show that Jafrac2 displaces Dronc from DIAP1 by competing with Dronc for the binding of DIAP1, consistent with the idea that Jafrac2 triggers cell death by liberating Dronc from DIAP1-mediated inhibition.