Escherichia coli RNase T, which is responsible for the 3' processing and end-turnover of tRNA and the maturation of 5 S RNA, is extremely sensitive to sulfhydryl reagents and to oxidation, suggesting a role for cysteine residues in its activity. Titration of homogeneous RNase T with 5,5'-dithiobis-(2-nitrobenzoic acid) revealed that the 4 cysteine residues present in each of the two protein subunits are in a reduced form and that 1 or 2 of them are important for activity. To identify these residue(s), each of the cysteines in RNase T was changed individually to either serine or alanine. The serine mutant at position 168 is greatly reduced in RNase T activity both in vivo and in vitro; likewise, the serine mutant at position 112 and the alanine mutants at positions 112 and 168 also display decreased RNase T activity. Mutations at the other cysteine positions show little or no change. Kinetic analyses of the mutant enzymes showed that the Km values of C168S and C168A are increased considerably, whereas their Vmax values are reduced only slightly compared to the wild type enzyme. The other mutant enzymes are little changed. Additional amino acid replacements at position 168 showed that the in vivo and in vitro activities of RNase T are in the order Cys approximately Val > Ala >> Ser >> Asn approximately Asp, which closely follows the relative hydrophobicity of these amino acid residues. However, the affinity for tRNA, determined by fluorescence quenching, is not altered in C168S, suggesting that Cys-168 is not directly involved in substrate binding. Interestingly, proteins altered at position 168 showed increased temperature sensitivity as the residue at that position became less hydrophobic. These data indicate that Cys-168 contributes a hydrophobic group that influences the structure and ultimately the catalytic activity of RNase T.