XIAP is a mammalian inhibitor of apoptosis protein (IAP). To determine residues within the second baculoviral IAP repeat (BIR2) required for inhibition of caspase 3, we screened a library of BIR2 mutants for loss of the ability to inhibit caspase 3 toxicity in the yeast Schizosaccharomyces pombe. Four of the mutations, not predicted to affect the structure of the BIR fold, clustered together on the N-terminal region that flanks BIR2, suggesting that this is a site of interaction with caspase 3. Introduction of these mutations into full-length XIAP reduced caspase 3 inhibitory activity up to 500-fold, but did not affect its ability to inhibit caspase 9 or interact with the IAP antagonist DIABLO. Furthermore, these mutants retained full ability to inhibit apoptosis in transfected cells, demonstrating that although XIAP is able to inhibit caspase 3, this activity is dispensable for inhibition of apoptosis by XIAP in vivo.