The yeast silent information regulator (Sir)2 protein links cellular metabolism and transcriptional silencing through its nicotinamide adenine dinucleotide (NAD)-dependent histone deacetylase activity. We report that mitochondria from mammalian cells contain intrinsic NAD-dependent deacetylase activity. This activity is inhibited by the NAD hydrolysis product nicotinamide, but not by trichostatin A, consistent with a class III deacetylase. We identify this deacetylase as the nuclear-encoded human Sir2 homologue hSIRT3, and show that hSIRT3 is located within the mitochondrial matrix. Mitochondrial import of hSIRT3 is dependent on an NH2-terminal amphipathic alpha-helix rich in basic residues. hSIRT3 is proteolytically processed in the mitochondrial matrix to a 28-kD product. This processing can be reconstituted in vitro with recombinant mitochondrial matrix processing peptidase (MPP) and is inhibited by mutation of arginines 99 and 100. The unprocessed form of hSIRT3 is enzymatically inactive and becomes fully activated in vitro after cleavage by MPP. These observations demonstrate the existence of a latent class III deacetylase that becomes catalytically activated upon import into the human mitochondria.