The recombinant human bifunctional NAD-dependent methylenetetrahydrofolate dehydrogenase-methenyltetrahydrofolate cyclohydrolase is unique in its absolute requirement for Mg2+ and inorganic phosphate. Both ions affect the affinity of the enzyme for NAD and have no effect on the binding of methylenetetrahydrofolate. The NAD cofactor can be replaced by NADP with a much higher KM and lower VMAX. Kinetic investigation using NADP supports the role of Mg2+ in dinucleotide binding and illustrates that the 2'-phosphate can substitute for phosphate in this process. The human NAD-dependent bifunctional enzyme has a 44% amino acid sequence identity with the dehydrogenase-cyclohydrolase domain of the yeast mitochondrial NADP-dependent trifunctional enzyme encoded by the MIS1 gene, compared to 37% identity with the corresponding domain of the cytosolic trifunctional enzyme. The sequence comparison and the kinetic properties suggest that the NAD bifunctional enzyme is the mammalian homolog of the yeast mitochondrial trifunctional enzyme, which has evolved a unique use of inorganic phosphate to change its dinucleotide specificity from NADP to NAD. Its role is proposed to be in providing formyltetrahydrofolate for the synthesis of formylmethionyl transfer RNA required for the initiation of protein synthesis in mitochondria.