N-Acetylglutamate kinase (AGK) and N-acetyl-gamma-glutamyl-phosphate reductase (AGPR) function as two separate mitochondrial enzymes, but are encoded by a single nuclear gene in several fungi. The Neurospora crassa arg-6 gene encoding these enzymes has been cloned and sequenced, and the enzymes responsible for processing the polyprotein precursor have been identified. The 871-amino acid precursor contains a normal N-terminal mitochondrial targeting sequence, an internal connecting region (approximately 200 amino acids) upstream of the distal reductase domain, and coding regions with N-terminal amino acid sequences identical with those of purified N-acetylglutamate kinase and N-acetyl-gamma-glutamyl-phosphate reductase. Sequence comparisons of the coding regions indicate high levels of conservation between prokaryotic and fungal proteins. Regions suggesting ancestral relationships to N-acetylglutamate synthase and aspartate beta-semialdehyde dehydrogenase have been identified. Both the N-terminal targeting sequence and the connecting region contain consensus sites for cleavage by the mitochondrial processing peptidase and processing enhancing protein. In vitro processing assays with intact mitochondria, solubilized mitochondria, and purified enzymes have shown that the mitochondrial processing peptidase and processing enhancing protein cleave not only the N-terminal mitochondrial targeting sequence but also process the polyprotein precursor into the two mature enzymes.