The cytosolic iron–sulfur (Fe–S) protein assembly (CIA) machinery comprises 11 essential components and matures Fe–S proteins involved in translation and genome maintenance. Maturation is initiated by the electron transfer chain NADPH–diflavin reductase Tah18–Fe–S protein Dre2 that facilitates the de novo assembly of a [4Fe–4S] cluster on the scaffold complex Cfd1-Nbp35. Tah18-Dre2 also play a critical role in the assembly of the diferric tyrosyl radical cofactor of ribonucleotide reductase. Dre2 contains eight conserved cysteine residues as potential co-ordinating ligands for Fe–S clusters but their functional importance and the type of bound clusters is unclear. In the present study, we use a combination of mutagenesis, cell biological and biochemical as well as UV–visible, EPR and Mössbauer spectroscopic approaches to show that the yeast Dre2 cysteine residues Cys252, Cys263, Cys266 and Cys268 (motif I) bind a [2Fe–2S] cluster, whereas cysteine residues Cys311, Cys314, Cys322 and Cys325 (motif II) co-ordinate a [4Fe–4S] cluster. All of these residues with the exception of Cys252 are essential for cell viability, cytosolic Fe–S protein activity and in vivo55Fe–S cluster incorporation. The N-terminal methyltransferase-like domain of Dre2 is important for proper Fe–S cluster assembly at motifs I and II, which occurs in an interdependent fashion. Our findings further resolve why recombinant Dre2 from Arabidopsis, Trypanosoma or humans has previously been isolated with a single [2Fe–2S] instead of native [2Fe–2S] plus [4Fe–4S] clusters. In the presence of oxygen, the motif I-bound [2Fe–2S] cluster is labile and the motif II-bound [4Fe–4S] cluster is readily converted into a [2Fe–2S] cluster.