Recent discoveries of NAD-mediated regulatory processes in mitochondria have documented important roles of this compartmentalized nucleotide pool in addition to energy transduction. Moreover, mitochondria respond to excessive nuclear NAD consumption arising from DNA damage-induced poly-ADP-ribosylation because poly(ADP-ribose) (PAR) can trigger the release of apoptosis-inducing factor from the organelles. To functionally assess mitochondrial NAD metabolism, we overexpressed the catalytic domain of nuclear PAR polymerase 1 (PARP1) and targeted it to the matrix, which resulted in the constitutive presence of PAR within the organelles. As a result, stably transfected HEK293 cells exhibited a decrease in NAD content and typical features of respiratory deficiency. Remarkably, inhibiting PARP activity revealed PAR degradation within mitochondria. Two enzymes, PAR glycohydrolase (PARG) and ADP-ribosylhydrolase 3 (ARH3), are known to cleave PAR. Both full-length ARH3 and a PARG isoform, which arises from alternative splicing, localized to the mitochondrial matrix. This conclusion was based on the direct demonstration of their PAR-degrading activity within mitochondria of living cells. The visualization of catalytic activity establishes a new approach to identify submitochondrial localization of proteins involved in the metabolism of NAD derivatives. In addition, targeted PARP expression may serve as a compartment-specific "knock-down" of the NAD content which is readily detectable by PAR formation.