Ssc1, the major Hsp70 of the mitochondrial matrix, is involved in the translocation of proteins from the cytosol into the matrix and their subsequent folding. To better understand the physiological mechanism of action of this Hsp70, we have undertaken a biochemical analysis of Ssc1 and two mutant proteins, Ssc1--2 and Ssc1--201. ssc1--2 is a temperature-sensitive mutant defective in both translocation and folding; ssc1--201 contains a second mutation in this ssc1 gene that suppresses the temperature-sensitive growth defect of ssc1--2, correcting the translocation but not the folding defect. We found that although Ssc1 was competent to facilitate the refolding of denatured luciferase in vitro, both Ssc1--2 and Ssc1--201 showed significant defects, consistent with the data obtained with isolated mitochondria. Purified Ssc1--2 had a lowered affinity for a peptide substrate compared with wild-type Ssc1 but only in the ADP-bound state. This peptide binding defect was reversed in the suppressor protein Ssc1--201. However, a defect in the ability of Hsp40 to stimulate the ATPase activity of Ssc1--2 was not corrected in Ssc1--201. Thus, the inability of these two mutant proteins to efficiently facilitate luciferase refolding correlates with their defect in stimulation of ATPase activity by Hsp40s, indicating that this interaction is critical for protein folding in mitochondria.