FtsH, a member of the AAA family of proteins, is the only membrane ATP-dependent protease universally conserved in prokaryotes, and the only essential ATP-dependent protease in Escherichia coli. We investigated the mechanism of degradation by FtsH. Other well-studied ATP-dependent proteases use ATP to unfold their substrates. In contrast, both in vitro and in vivo studies indicate that degradation by FtsH occurs efficiently only when the substrate is a protein of low intrinsic thermodynamic stability. Because FtsH lacks robust unfoldase activity, it is able to use the protein folding state of substrates as a criterion for degradation. This feature may be key to its role in the cell and account for its ubiquitous distribution among prokaryotic organisms.