The BolA homologue Fra2 and the cytosolic monothiol glutaredoxins Grx3 and Grx4 together play a key role in regulating iron homeostasis in Saccharomyces cerevisiae. Genetic studies indicate that Grx3/4 and Fra2 regulate activity of the iron-responsive transcription factors Aft1 and Aft2 in response to mitochondrial Fe-S cluster biosynthesis. We have previously shown that Fra2 and Grx3/4 form a [2Fe-2S](2+)-bridged heterodimeric complex with iron ligands provided by the active site cysteine of Grx3/4, glutathione, and a histidine residue. To further characterize this unusual Fe-S-binding complex, site-directed mutagenesis was used to identify specific residues in Fra2 that influence Fe-S cluster binding and regulation of Aft1 activity in vivo. Here, we present spectroscopic evidence that His-103 in Fra2 is an Fe-S cluster ligand in the Fra2-Grx3 complex. Replacement of this residue does not abolish Fe-S cluster binding, but it does lead to a change in cluster coordination and destabilization of the [2Fe-2S] cluster. In vivo genetic studies further confirm that Fra2 His-103 is critical for control of Aft1 activity in response to the cellular iron status. Using CD spectroscopy, we find that ∼1 mol eq of apo-Fra2 binds tightly to the [2Fe-2S] Grx3 homodimer to form the [2Fe-2S] Fra2-Grx3 heterodimer, suggesting a mechanism for formation of the [2Fe-2S] Fra2-Grx3 heterodimer in vivo. Taken together, these results demonstrate that the histidine coordination and stability of the [2Fe-2S] cluster in the Fra2-Grx3 complex are essential for iron regulation in yeast.