We have previously shown that glutaredoxin 2 (Grx2) from Saccharomyces cerevisiae localizes at 3 different subcellular compartments, cytosol, mitochondrial matrix and outer membrane, as the result of different postranslational processing of one single gene. Having set the mechanism responsible for this remarkable phenomenon, we have now aimed at defining whether this diversity of subcellular localizations correlates with differences in structure and function of the Grx2 isoforms. We have determined the N-terminal sequence of the soluble mitochondrial matrix Grx2 by mass spectrometry and have determined the exact cleavage site by Mitochondrial Processing Peptidase (MPP). As a consequence of this cleavage, the mitochondrial matrix Grx2 isoform possesses a basic tetrapeptide extension at the N-terminus compared to the cytosolic form. A functional relationship to this structural difference is that mitochondrial Grx2 displays a markedly higher activity in the catalysis of GSSG reduction by the mitochondrial dithiol dihydrolipoamide. We have prepared Grx2 mutants affected on key residues inside the presequence to direct the protein to one single cellular compartment; either the cytosol, the mitochondrial membrane or the matrix and have analyzed their functional phenotypes. Strains expressing Grx2 only in the cytosol are equally sensitive to H(2)O(2) as strains lacking the gene, whereas those expressing Grx2 exclusively in the mitochondrial matrix are more resistant. Mutations on key basic residues drastically affect the cellular fate of the protein, showing that evolutionary diversification of Grx2 structural and functional properties are strictly dependent on the sequence of the targeting signal peptide.