Cell survival depends on essential processes in mitochondria. Various proteases within these organelles regulate mitochondrial biogenesis and ensure the complete degradation of excess or damaged proteins. Many of these proteases are highly conserved and ubiquitous in eukaryotic cells. They can be assigned to three functional classes: processing peptidases, which cleave off mitochondrial targeting sequences of nuclearly encoded proteins and process mitochondrial proteins with regulatory functions; ATP-dependent proteases, which either act as processing peptidases with regulatory functions or as quality-control enzymes degrading non-native polypeptides to peptides; and oligopeptidases, which degrade these peptides and mitochondrial targeting sequences to amino acids. Disturbances of protein degradation within mitochondria cause severe phenotypes in various organisms and can lead to the induction of apoptotic programmes and cell-specific neurodegeneration in mammals. After an overview of the proteolytic system of mitochondria, we will focus on versatile functions of ATP-dependent AAA proteases in the inner membrane. These conserved proteolytic machines conduct protein quality surveillance of mitochondrial inner membrane proteins, mediate vectorial protein dislocation from membranes, and, acting as processing enzymes, control ribosome assembly, mitochondrial protein synthesis, and mitochondrial fusion. Implications of these functions for cell-specific axonal degeneration in hereditary spastic paraplegia will be discussed.