PilD is a bifunctional enzyme responsible for cleavage of the leader peptides from the precursors of the type IV pilin and four proteins with type IV pilin-like amino termini that are required for extracellular protein secretion in Pseudomonas aeruginosa. Following cleavage, PilD also catalyzes the second major posttranslational modification of these proteins, namely the N-methylation of the amino-terminal phenylalanine residues of the mature polypeptides. In this report, we demonstrate that the enzymatic activities of PilD involve cysteine residues that lie within a cytoplasmic domain that shows a high degree of similarity to other proteins postulated to perform the same function in other bacterial species. Both activities are reduced in the presence of sulfhydryl-reactive reagents such as N-ethylmaleimide and p-chloromercuribenzoate. Mutagenesis of pilD resulting in specific amino acid substitutions in all of the Cys residues in PilD show that the 4 conserved cysteines in the cytoplasmic domain are required for full peptidase activity in vivo and for complete peptidase and methyltransferase activities in vitro. Conversely, substitution for a Cys residue in a membrane spanning domain had no effect on PilD activities in vivo or in vitro. Evidence suggests that the peptidase and methyltransferase sites of PilD are adjacent, with the Cys residues in the cytoplasmic domain important for methyl donor binding, as prior reaction of PilD with the S-adenosyl-L-methionine analogue sinefungin afforded complete protection of peptidase activity from inactivation with N-ethylmaleimide.