In most bacteria and plants, direct biosynthesis of cysteine from sulfide via O-acetylserine (OAS) is essential to produce sulfur amino acids from inorganic sulfur. Here, we report the functional analysis of a novel mitochondrial serine O-acetyltransferase (SAT), responsible for converting serine into OAS, in the thermotolerant methylotrophic yeast Ogataea parapolymorpha. Domain analysis of O. parapolymorpha SAT (OpSat1p) and other fungal SATs revealed that these proteins possess a mitochondrial targeting sequence (MTS) at the N-terminus and an α/β hydrolase 1 domain at the C-terminal region, which is quite different from the classical SATs of bacteria and plants. Noticeably, OpSat1p is functionally interchangeable with Escherichia coli SAT, CysE, despite that it displays much less enzymatic activity, with marginal feedback inhibition by cysteine, compared to CysE. The Opsat1Δ-null mutant showed remarkably reduced intracellular levels of cysteine and glutathione, implying OAS generation defect. The MTS of OpSat1p directs the mitochondrial targeting of a reporter protein, thus, supporting the localization of OpSat1p in the mitochondria. Intriguingly, the OpSat1p variant lacking MTS restores the OAS auxotrophy, but not the cysteine auxotrophy of the Opsat1Δ mutant strain. This is the first study on a mitochondrial SAT with critical function in sulfur assimilatory metabolism in fungal species.