Iron regulatory protein 2 coordinates cellular regulation of iron metabolism by binding to iron responsive elements in mRNA. The protein is synthesized constitutively but is rapidly degraded when iron stores are replete. This iron-dependent degradation requires the presence of a 73-residue degradation domain, but its functions have not yet been established. We now show that the domain can act as an iron sensor, mediating its own covalent modification. The domain forms an iron-binding site with three cysteine residues located in the middle of the domain. It then reacts with molecular oxygen to generate a reactive oxidizing species at the iron-binding site. One cysteine residue is oxidized to dehydrocysteine and other products. This covalent modification may thus mark the protein molecule for degradation by the proteasome system.