The so-called thioredoxin system, thioredoxin (Trx), thioredoxin reductase (Trr), and NADPH, acts as a disulfide reductase system and can protect cells against oxidative stress. In Saccharomyces cerevisiae, two thioredoxins (Trx1 and Trx2) and one thioredoxin reductase (Trr1) have been characterized, all of them located in the cytoplasm. We have identified and characterized a novel thioredoxin system in S. cerevisiae. The TRX3 gene codes for a 14-kDa protein containing the characteristic thioredoxin active site (WCGPC). The TRR2 gene codes for a protein of 37 kDa with the active-site motif (CAVC) present in prokaryotic thioredoxin reductases and binding sites for NADPH and FAD. We cloned and expressed both proteins in Escherichia coli, and the recombinant Trx3 and Trr2 proteins were active in the insulin reduction assay. Trx3 and Trr2 proteins have N-terminal domain extensions with characteristics of signals for import into mitochondria. By immunoblotting analysis of Saccharomyces subcellular fractions, we provide evidence that these proteins are located in mitochondria. We have also constructed S. cerevisiae strains null in Trx3 and Trr2 proteins and tested them for sensitivity to hydrogen peroxide. The Deltatrr2 mutant was more sensitive to H2O2, whereas the Deltatrx3 mutant was as sensitive as the wild type. These results suggest an important role of the mitochondrial thioredoxin reductase in protection against oxidative stress in S. cerevisiae.