The mitochondrial inner membrane peptidase IMP of Saccharomyces cerevisiae is required for proteolytic processing of certain mitochondrially and nucleus-encoded proteins during their export from the matrix into the inner membrane or the intermembrane space. The membrane-associated signal peptidase complex is composed of the two catalytic subunits, Imp1 and Imp2, and the Som1 protein. The IMP subunits are thought to function in membrane association, interaction and stabilisation of subunits, substrate specificity, and proteolysis. We have analysed inner membrane peptidase mutants and substrates to gain more insight into the functions of various domains and investigate the basis of substrate recognition. The results suggest that certain conserved glycine residues in the second and third conserved regions of Imp1 and Imp2 are important for stabilisation of the Imp complex and for the proteolytic activity of the subunits, respectively. The non-conserved C-terminal parts of the Imp subunits are important for their proteolytic activities. The C-terminal region of Imp2, comprising a predicted second transmembrane segment, is dispensable for the stability of Imp2 and Imp1, and cannot functionally substitute for the C-terminal segment of Imp1. Alteration of the Imp2 cleavage site in cytochrome c(1) (from A/M to N/D) reveals the specificity of the Imp2 peptidase. In addition, we have identified Gut2, the mitochondrial FAD-dependent glycerol-3-phosphate dehydrogenase, as a new substrate for Imp1. Failure to cleave the Gut2 precursor may contribute to the pet phenotype of certain imp mutants. Gut2 is associated with the inner membrane, and is essential for growth on glycerol-containing medium. Suggested functions of the analysed residues and domains of the IMP subunits, characteristics of the cleavage sites of substrates and implications for the phenotypes of imp mutants are discussed.