Ydj1 is the major type I Hsp40 (heat-shock protein 40) family member in yeast. Ydj1 can pair with yeast Hsp70 Ssa1 to facilitate protein translocation and protein folding. Ydj1 itself can also function as a molecular chaperone to bind the non-native polypeptides and suppress protein aggregations in vitro. The crystal structure of Ydj1 complexed with its peptide substrate GWLYEIS reveals that a hydrophobic pocket located on Ydj1 domain I may play a major role in mediating the interactions between Ydj1 and the peptide substrate. To understand the mechanism by which Ydj1 interacts with non-native polypeptide, we have mutated the residues forming the hydrophobic pocket, based on the structural information. We have also constructed deletion mutations of the zinc-finger motifs within Ydj1. We have examined the functional consequences of these Ydj1 mutants by in vivo and in vitro assays. The results indicated that the hydrophobic pocket located on Ydj1 plays a critical role in its molecular chaperone activity by mediating interactions with the non-native polypeptides. © 2005 Biochemical Society.