The structure of mitochondria is highly dynamic and depends on the balance of fusion and fission processes. Deletion of the mitochondrial dynamin-like protein Mgm1 in yeast leads to extensive fragmentation of mitochondria and loss of mitochondrial DNA. Mgm1 and its human ortholog OPA1, associated with optic atrophy type I in humans, were proposed to be involved in fission or fusion of mitochondria or, alternatively, in remodeling of the mitochondrial inner membrane and cristae formation (Wong, E. D., Wagner, J. A., Gorsich, S. W., McCaffery, J. M., Shaw, J. M., and Nunnari, J. (2000) J. Cell Biol. 151, 341-352; Wong, E. D., Wagner, J. A., Scott, S. V., Okreglak, V., Holewinske, T. J., Cassidy-Stone, A., and Nunnari, J. (2003) J. Cell Biol. 160, 303-311; Sesaki, H., Southard, S. M., Yaffe, M. P., and Jensen, R. E. (2003) Mol. Biol. Cell, in press). Mgm1 and its orthologs exist in two forms of different lengths. To obtain new insights into their biogenesis and function, we have characterized these isoforms. The large isoform (l-Mgm1) contains an N-terminal putative transmembrane segment that is absent in the short isoform (s-Mgm1). The large isoform is an integral inner membrane protein facing the intermembrane space. Furthermore, the conversion of l-Mgm1 into s-Mgm1 was found to be dependent on Pcp1 (Mdm37/YGR101w) a recently identified component essential for wild type mitochondrial morphology. Pcp1 is a homolog of Rhomboid, a serine protease known to be involved in intercellular signaling in Drosophila melanogaster, suggesting a function of Pcp1 in the proteolytic maturation process of Mgm1. Expression of s-Mgm1 can partially complement the Deltapcp1 phenotype. Expression of both isoforms but not of either isoform alone was able to partially complement the Deltamgm1 phenotype. Therefore, processing of l-Mgm1 by Pcp1 and the presence of both isoforms of Mgm1 appear crucial for wild type mitochondrial morphology and maintenance of mitochondrial DNA.