The mitochondrial inner membrane is among the most protein-rich cellular membranes. Its functional integrity is maintained through a concerted action of several conserved mechanisms that are far from clear. Here, using baker’s yeast model, we functionally characterize Mdm38/LETM1, a disease-related protein whose function is crucial for mitochondrial physiology, but remains incompletely understood. We find that defects due to loss of Mdm38 extend beyond respiratory chain complexes harboring mitochondria-encoded subunits and trigger proteostatic response in the inner membrane. Mdm38 function is required for mitochondrial iron homeostasis and mitochondria to vacuole communication of iron bioavailability. These perturbations are linked to the m-AAA quality control protease, whose unrestrained activity affects the assembly and stability of respiratory chain complexes. Our results elucidate the role of Mdm38 in mitochondrial biology and reveal how it couples proteostatic mechanisms to subcellular ion homeostasis.