IscU is a central component of the ISC machinery and serves as a scaffold for the de novo assembly of iron-sulfur (Fe-S) clusters prior to their delivery to target apo-Fe-S proteins. However, the molecular mechanism is not yet fully understood. In this study, we have conducted mutational analysis of E. coli IscU using the recently developed genetic complementation system of a mutant that can survive without Fe-S clusters. The Fe-S cluster ligands (C37, C63, H105, C106) and the proximal D39 and K103 residues are essential for in vivo function of IscU and could not be substituted with any other amino acids. Furthermore, we found that substitution of Y3, a strictly conserved residue among IscU homologs, abolished in vivo functions. Surprisingly, a second-site suppressor mutation in IscS (A349V) reverted the defect caused by IscU Y3 substitutions. Biochemical analysis revealed that IscU Y3 was crucial for functional interaction with IscS and sulfur transfer between the two proteins. Our findings suggest that the critical role of IscU Y3 is linked to the conformational dynamics of the flexible loop of IscS, which is required for the ingenious sulfur transfer to IscU.