The bicoid stability factor (BSF) of Drosophila melanogaster has been reported to be present in the cytoplasm, where it stabilizes the maternally contributed bicoid mRNA and binds mRNAs expressed from early zygotic genes. BSF may also have other roles, as it is ubiquitously expressed and essential for survival of adult flies. We have performed immunofluorescence and cell fractionation analyses and show here that BSF is mainly a mitochondrial protein. We studied two independent RNAi knockdown fly lines and report that reduced BSF protein levels lead to a severe respiratory deficiency and delayed development at the late larvae stage. Ubiquitous knockdown of BSF results in a severe reduction of the polyadenylation tail lengths of specific mitochondrial mRNAs, accompanied by an enrichment of unprocessed polycistronic RNA intermediates. Furthermore, we observed a significant reduction in mRNA steady state levels, despite increased de novo transcription. Surprisingly, mitochondrial de novo translation is increased and abnormal mitochondrial translation products are present in knockdown flies, suggesting that BSF also has a role in coordinating the mitochondrial translation in addition to its role in mRNA maturation and stability. We thus report a novel function of BSF in flies and demonstrate that it has an important intra-mitochondrial role, which is essential for maintaining mtDNA gene expression and oxidative phosphorylation.