This study provides the first direct evidence for the dual role of the metalloprotease FtsH in membrane protein biogenesis. Using the physiological substrate DrrAB, it is shown that FtsH is not only responsible for proteolysis of unassembled DrrB protein but it also plays a much broader role in biogenesis of the DrrAB complex. Previous studies showed that the stable expression of DrrB in the membrane depends on simultaneous expression of DrrA. Here we show that DrrB is proteolyzed by FtsH when it is expressed alone. Moreover, DrrA and DrrB proteins expressed together in a temp-sensitive ftsH mutant strain of E. coli were found to be non-functional due to their incorrect assembly. Simultaneous expression of wild-type FtsH in trans resulted in normal doxorubicin efflux. Strikingly, doxorubicin efflux could be restored in mutant cells irrespective of whether FtsH was expressed simultaneously with DrrAB or expressed after these proteins had already accumulated in an inactive conformation, thus providing crucial evidence for the ability of FtsH to refold the misassembled proteins. Complementation experiments also showed that the catalytic AAA domain of FtsH contains a chaperone-like activity, however, unlike wild-type FtsH, it was unable to restore function. Our results therefore show for the first time that FtsH contains the protease as well as refolding functions, and both the AAA and the proteolytic domains of FtsH are required for each of these activities.