Assimilatory sulfate reduction supplies prototrophic organisms with reduced sulfur that is required for the biosynthesis of all sulfur-containing metabolites, including cysteine and methionine. The reduction of sulfate requires its activation via an ATP-dependent activation to form adenosine-5'-phosphosulfate (APS). Depending on the species, APS can be reduced directly to sulfite by APS reductase (APR) or undergo a second phosphorylation to yield 3'-phosphoadenosine-5'-phosphosulfate (PAPS), the substrate for PAPS reductase (PAPR). These essential enzymes have no human homologue, rendering them attractive targets for the development of novel antibacterial drugs. APR and PAPR share sequence and structure homology as well as a common catalytic mechanism, but the enzymes are distinguished by two features, namely, the amino acid sequence of the phosphate-binding loop (P-loop) and an iron-sulfur cofactor in APRs. On the basis of the crystal structures of APR and PAPR, two P-loop residues are proposed to determine substrate specificity; however, this hypothesis has not been tested. In contrast to this prevailing view, we report here that the P-loop motif has a modest effect on substrate discrimination. Instead, by means of metalloprotein engineering, spectroscopic, and kinetic analyses, we demonstrate that the iron-sulfur cluster cofactor enhances APS reduction by nearly 1000-fold, thereby playing a pivotal role in substrate specificity and catalysis. These findings offer new insights into the evolution of this enzyme family and extend the known functions of protein-bound iron-sulfur clusters.