Recent genome-wide association studies have identified a missense variant p.A165T in mitochondrial amidoxime-reducing component 1 (mARC1) that is strongly associated with protection from all-cause cirrhosis and improved prognosis in nonalcoholic steatohepatitis. The precise mechanism of this protective effect is unknown. Substitution of alanine 165 with threonine is predicted to affect mARC1 protein stability and to have deleterious effects on its function. To investigate the mechanism, we have generated a knock-in mutant mARC1 A165T and a catalytically dead mutant C273A (as a control) in human hepatoma HepG2 cells, enabling characterization of protein subcellular distribution, stability, and biochemical functions of the mARC1 mutant protein expressed from its endogenous locus. Compared to WT mARC1, we found that the A165T mutant exhibits significant mislocalization outside of its traditional location anchored in the mitochondrial outer membrane and reduces protein stability, resulting in lower basal levels. We evaluated the involvement of the ubiquitin proteasome system in mARC1 A165T degradation and observed increased ubiquitination and faster degradation of the A165T variant. In addition, we have shown that HepG2 cells carrying the MTARC1 p.A165T variant exhibit lower N-reductive activity on exogenously added amidoxime substrates in vitro. The data from these biochemical and functional assays suggest a mechanism by which the MTARC1 p.A165T variant abrogates enzyme function which may contribute to its protective effect in liver disease.