The ABC transporter Mdl1p, a structural and functional homologue of the transporter associated with antigen processing (TAP) plays an important role in intracellular peptide transport from the mitochondrial matrix of Saccharomyces cerevisiae. To characterize the ATP hydrolysis cycle of Mdl1p, the nucleotide-binding domain (NBD) was overexpressed in Escherichia coli and purified to homogeneity. The isolated NBD was active in ATP binding and hydrolysis with a turnover of 25 ATP per minute and a Km of 0.6 mm and did not show cooperativity in ATPase activity. However, the ATPase activity was non-linearly dependent on protein concentration (Hill coefficient of 1.7), indicating that the functional state is a dimer. Dimeric catalytic transition states could be trapped either by incubation with orthovanadate or beryllium fluoride, or by mutagenesis of the NBD. The nucleotide composition of trapped intermediate states was determined using [alpha-32P]ATP and [gamma-32P]ATP. Three different dimeric intermediate states were isolated, containing either two ATPs, one ATP and one ADP, or two ADPs. Based on these experiments, it was shown that: (i) ATP binding to two NBDs induces dimerization, (ii) in all isolated dimeric states, two nucleotides are present, (iii) phosphate can dissociate from the dimer, (iv) both nucleotides are hydrolyzed, and (v) hydrolysis occurs in a sequential mode. Based on these data, we propose a processive-clamp model for the catalytic cycle in which association and dissociation of the NBDs depends on the status of bound nucleotides.