We have investigated the mechanism of frataxin, a conserved mitochondrial protein involved in iron metabolism and neurodegenerative disease. Previous studies revealed that the yeast frataxin homologue (mYfh1p) is activated by Fe(II) in the presence of O2 and assembles stepwise into a 48-subunit multimer (alpha48) that sequesters >2000 atoms of iron in 2-4-nm cores structurally similar to ferritin iron cores. Here we show that mYfh1p assembly is driven by two sequential iron oxidation reactions: A ferroxidase reaction catalyzed by mYfh1p induces the first assembly step (alpha --> alpha3), followed by a slower autoxidation reaction that promotes the assembly of higher order oligomers yielding alpha48. Depending on the ionic environment, stepwise assembly is associated with accumulation of 50-75 Fe(II)/subunit. Initially, this Fe(II) is loosely bound to mYfh1p and can be readily mobilized by chelators or made available to the mitochondrial enzyme ferrochelatase to synthesize heme. Transfer of mYfh1p-bound Fe(II) to ferrochelatase occurs in the presence of citrate, a physiologic ferrous iron chelator, suggesting that the transfer involves an intermolecular interaction. If mYfh1p-bound Fe(II) is not transferred to a ligand, iron oxidation, and mineralization proceed to completion, Fe(III) becomes progressively less accessible, and a stable iron-protein complex is formed. Iron oxidation-driven stepwise assembly is a novel mechanism by which yeast frataxin can function as an iron chaperone or an iron store.