The 18-kDa translocator protein (TSPO) is an evolutionarily well-conserved membrane protein, found primarily in the outer membrane of mitochondria among various species. TSPO binds with high affinity to a variety of drugs, for which it serves as biomarkers and therapeutic targets. Protoporphyrin IX (PpIX) is an endogenous ligand of TSPO and plays a vital role in organisms as a precursor to other critical compounds. The interaction between TSPO and PpIX has been studied for years, but the molecular details of the interaction have yet to be revealed. It has remained challenging to resolve their detailed structure and functional mechanism in a functionally active state in a membrane environment. Here we report our studies on the structure-function relationship of BcTSPO, a bacterial homologue of TSPO, in lipid nanodiscs. Spin-label double electron-electron resonance (DEER) spectroscopy was utilized to investigate the conformation of BcTSPO in nanodiscs with or without PpIX. The results show that the conformation of BcTSPO in lipid nanodiscs is significantly different from the known crystal structures determined in detergent micelles. In addition to the structural conformation of TSPO in nanodiscs by DEER, we have investigated the functional activity of BcTSPO using fluorescence and absorption spectroscopy. We used fluorescence spectroscopy to monitor TSPO-mediated PpIX degradation, and absorption spectroscopy to observe the resulting products. Fluorescence spectroscopy reveals that wild-type BcTSPO, when embedded in nanodiscs or detergent micelles, can catalyze PpIX degradation with a similar reaction rate. When single mutations are applied, we observed large changes in the catalytic behaviors concerning the PpIX degradation, providing new insights into the TSPO-mediated porphyrin catabolism in a light-dependent manner.