Kaposi's sarcoma-associated herpesvirus encodes two homologous E3 ligases, MIR1 and MIR2, that mediate the ubiquitination and subsequent downregulation of several cell surface proteins, and in particular major histocompatibility complex class I (MHC-I) molecules. We have previously shown that, in addition to lysine ubiquitination, MIR1 has the unique ability of transferring ubiquitin onto MHC-I molecules lacking available lysine residues, in a cysteine-dependent manner. Here we report that MIR1 activity is maximal when either a lysine or cysteine residue is placed approximately 15 amino acids away from the transmembrane domain, whereas MIR2 preferentially targets residues, including cysteines, that are closer to the transmembrane domain. Thus MIR1 and -2 can distinguish their substrates based on the position of the lysine or cysteine residues, suggesting that these proteins have evolved to target different sets of surface molecules. These results indicate that the position of target residues within a substrate is an essential determinant of E3 ubiquitin ligase specificity.