During apoptosis, release of cytochrome c initiates dATP-dependent oligomerization of Apaf-1 and formation of the apoptosome. In a cell-free system, we have addressed the order in which apical and effector caspases, caspases-9 and -3, respectively, are recruited to, activated and retained within the apoptosome. We propose a multi-step process, whereby catalytically active processed or unprocessed caspase-9 initially binds the Apaf-1 apoptosome in cytochrome c/dATP-activated lysates and consequently recruits caspase-3 via an interaction between the active site cysteine (C287) in caspase-9 and a critical aspartate (D175) in caspase-3. We demonstrate that XIAP, an inhibitor-of-apoptosis protein, is normally present in high molecular weight complexes in unactivated cell lysates, but directly interacts with the apoptosome in cytochrome c/dATP-activated lysates. XIAP associates with oligomerized Apaf-1 and/or processed caspase-9 and influences the activation of caspase-3, but also binds activated caspase-3 produced within the apoptosome and sequesters it within the complex. Thus, XIAP may regulate cell death by inhibiting the activation of caspase-3 within the apoptosome and by preventing release of active caspase-3 from the complex.