We characterized the SMC2 (structural maintenance of chromosomes) gene that encodes a new Saccharomyces cerevisiae member of the growing family of SMC proteins. This family of evolutionary conserved proteins was introduced with identification of SMC1, a gene essential for chromosome segregation in budding yeast. The analysis of the putative structure of the Smc2 protein (Smc2p) suggests that it defines a distinct subgroup within the SMC family. This subgroup includes the ScII, XCAPE, and cut14 proteins characterized concurrently. Smc2p is a nuclear, 135-kD protein that is essential for vegetative growth. The temperature-sensitive mutation, smc2-6, confers a defect in chromosome segregation and causes partial chromosome decondensation in cells arrested in mitosis. The Smc2p molecules are able to form complexes in vivo both with Smc1p and with themselves, suggesting that they can assemble into a multimeric structure. In this study we present the first evidence that two proteins belonging to two different subgroups within the SMC family carry nonredundant biological functions. Based on genetic, biochemical, and evolutionary data we propose that the SMC family is a group of prokaryotic and eukaryotic chromosomal proteins that are likely to be one of the key components in establishing the ordered structure of chromosomes.