X-linked inhibitor-of-apoptosis protein (XIAP) interacts with caspase-9 and inhibits its activity, whereas Smac (also known as DIABLO) relieves this inhibition through interaction with XIAP. Here we show that XIAP associates with the active caspase-9-Apaf-1 holoenzyme complex through binding to the amino terminus of the linker peptide on the small subunit of caspase-9, which becomes exposed after proteolytic processing of procaspase-9 at Asp315. Supporting this observation, point mutations that abrogate the proteolytic processing but not the catalytic activity of caspase-9, or deletion of the linker peptide, prevented caspase-9 association with XIAP and its concomitant inhibition. We note that the N-terminal four residues of caspase-9 linker peptide share significant homology with the N-terminal tetra-peptide in mature Smac and in the Drosophila proteins Hid/Grim/Reaper, defining a conserved class of IAP-binding motifs. Consistent with this finding, binding of the caspase-9 linker peptide and Smac to the BIR3 domain of XIAP is mutually exclusive, suggesting that Smac potentiates caspase-9 activity by disrupting the interaction of the linker peptide of caspase-9 with BIR3. Our studies reveal a mechanism in which binding to the BIR3 domain by two conserved peptides, one from Smac and the other one from caspase-9, has opposing effects on caspase activity and apoptosis.