Smac/DIABLO is a mitochondrial protein that is released along with cytochrome c during apoptosis and promotes cytochrome c-dependent caspase activation by neutralizing inhibitor of apoptosis proteins (IAPs). We provide evidence that Smac/DIABLO functions at the levels of both the Apaf-1-caspase-9 apoptosome and effector caspases. The N terminus of Smac/DIABLO is absolutely required for its ability to interact with the baculovirus IAP repeat (BIR3) of XIAP and to promote cytochrome c-dependent caspase activation. However, it is less critical for its ability to interact with BIR1/BIR2 of XIAP and to promote the activity of the effector caspases. Consistent with the ability of Smac/DIABLO to function at the level of the effector caspases, expression of a cytosolic Smac/DIABLO in Type II cells allowed TRAIL to bypass Bcl-xL inhibition of death receptor-induced apoptosis. Combined, these data suggest that Smac/DIABLO plays a critical role in neutralizing IAP inhibition of the effector caspases in the death receptor pathway of Type II cells.