The mechanism for regeneration of the active-site "peroxidatic" cysteine in 1-Cys peroxiredoxins is a matter of debate. Saccharomyces cerevisiae Prx1 is a mitochondrial enzyme belonging to the 1-Cys Prx, whereas Grx2 is involved in antioxidant defense and localizes at the mitochondria, so we hypothesized that it could be a perfect candidate to resolve the sulfenate in Prx1 with GSH. In vitro experiments with purified Prx1p and Grx2p demonstrate that Grx2p, at concentrations <1 microM, coupled to GSH, is a very efficient thiolic intermediary for the reduction of the peroxidatic Cys in Prx1p. Prx1p forms oligomeric aggregates natively, but depolymerizes down to a dimeric state after treatment with GSH. The catalytic cycle involves glutathionylation of dimeric Prx1p and deglutathionylation by Grx2p. Dihydrolipoamide, a genuine mitochondrial dithiol, can efficiently substitute for GSH. The activity is highest at alkaline pH, consistent with the conditions of active respiring mitochondria, and the process is highly specific for 1-Cys Prx because Grx2p is totally inactive with human PRX1, a typical 2-Cys Prx, as opposed to the promiscuity of Trx. Our results suggest that although Trx is the reductant involved in the reduction of peroxides by 2-Cys-Prx, Grx might be the natural resolving partner of 1-Cys Prx through a monothiolic mechanism.