Escherichia coli FtsH is a membrane-bound and ATP-dependent protease which degrades some soluble and integral membrane proteins. The N-terminal region of FtsH mediates membrane association as well as homooligomeric interaction of this enzyme. Previously, we studied in vivo functionality of FtsH derivatives, in which the N-terminal membrane region was either deleted (FtsH(Delta TM)), replaced by a leucine zipper (Zip-FtsH(Delta TM)), or replaced by a lactose permease transmembrane segment (LacY-FtsH), It was indicated that homooligomerization is required for the minimum proteolytic activity, whereas a transmembrane sequence is required for membrane protein degradation. Here we characterized these proteins in vitro. Although these mutant enzymes were very low in their activities, they were significantly stimulated by dimethyl sulfoxide, which enabled us to characterize their activities. LacY-FtsH degraded both soluble and membrane proteins, but Zip-FtsH(Delta TM) only degraded soluble proteins. These proteins also exhibited significant ATPase activities. However, FtsH(Delta TM) remained inactive both in ATPase and in protease activities even in the presence of dimethyl sulfoxide. The monomeric FtsH(Delta TM) was able to bind ATP and a denatured protein. These results indicate that subunit association is important for the enzymatic catalysis by FtsH and that the additional presence of the transmembrane sequence is required for this enzyme to degrade a membrane protein even under detergent-solubilized conditions.