The Thermoplasma VCP-like ATPase from Thermoplasma acidophilum (VAT) ATPase is a member of the two-domain AAA ATPases and homologous to the mammalian p97/VCP and NSF proteins. We show here that the VAT ATPase complex unfolds green fluorescent protein (GFP) labeled with the ssrA-degradation tag. Increasing the Mg2+ concentration derepresses the ATPase activity and concomitantly stimulates the unfolding activity of VAT. Similarly, the VATDeltaN complex, a mutant of VAT deleted for the N domain, displays up to 24-fold enhanced ATP hydrolysis and 250-fold enhanced GFP unfolding activity when compared with wild-type VAT. To determine the individual contribution of the two AAA domains to ATP hydrolysis and GFP unfolding we performed extensive site-directed mutagenesis of the Walker A, Walker B, sensor-1, and pore residues in both AAA domains. Analysis of the VAT mutant proteins, where ATP hydrolysis was confined to a single AAA domain, revealed that the first domain (D1) is sufficient to exert GFP unfolding indistinguishable from wild-type VAT, while the second AAA domain (D2), although active, is significantly less efficient than wild-type VAT. A single conserved aromatic residue in the D1 section of the pore was found to be essential for GFP unfolding. In contrast, two neighboring residues in the D2 section of the pore had to be exchanged simultaneously, to achieve a drastic inhibition of GFP unfolding.