Most nuclearly encoded mitochondrial proteins are synthesized with amino-terminal leader peptides that are removed by the mitochondrial processing peptidase (MPP) after translocation. Earlier we reported cloning and sequencing of a cDNA for the larger subunit (MPP alpha subunit) of this enzyme from rat liver mitochondria. We have now completed the cloning and sequencing of a cDNA encoding the smaller subunit of the enzyme (MPP beta subunit) from the same source. The cDNA consists of 1570 bp: 17 bp of 5'-untranslated sequence, 1467 bp of coding sequence, and 86 bp of 3'-untranslated sequence. The predicted protein consists of 489 amino acid residues, including a 45-amino acid leader peptide at the amino terminus and a 444-amino acid mature protein. The amino acid sequences of four tryptic peptides derived from purified MPP beta subunit precisely match those predicted by the cDNA sequence, as does the predicted mature amino terminus. The amino-terminal sequence is typical of a mitochondrial leader peptide, with eight positively charged arginine residues and a single negatively charged aspartate residue. When the amino acid sequence of rat MPP beta subunit is compared with sequences in the protein data bases, significant homology is found with the protease-enhancing protein of Neurospora crassa, the smaller subunit of MPP from Saccharomyces cerevisiae, and the core I protein of bovine ubiquinol:cytochrome c reductase. Lower homology is found with other members of a recently proposed class of endoproteases, which includes human insulinase and protease III from Escherichia coli.