Thioredoxins (Trxs) are ubiquitous proteins that play vital roles in several physiological processes. Alr2205, a thioredoxin-like protein from Anabaena PCC 7120, was evolutionarily closer to the Trx-domain of the NADPH-Thioredoxin Reductase C than the other thioredoxins. The Alr2205 protein showed disulphide reductase activity despite the presence a non-canonical active site motif 'CPSC'. Alr2205 not only physically interacted with, but also acted as a physiological reductant of Alr4641 (2-Cys-Peroxiredoxin), supporting its peroxidase function. Structurally, Alr2205 was a monomeric protein that formed an intramolecular disulphide bond between the two active site cysteines. However, the Alr2205C41S protein, wherein the resolving cysteine was mutated to serine, was capable of forming intermolecular disulphide bond and exist as a dimer when treated with H2O2. Overproduction of Alr2205 in E. coli protected cells from heavy metals, but not oxidative stress. To delve into its physiological role, Alr2205/Alr2205C41S was overexpressed in Anabaena, and the ability of the corresponding strains (An2205+ or An2205C41S+) to withstand environmental stresses was assessed. An2205+ showed higher resistance to H2O2 than An2205C41S+, indicating that the disulphide reductase function of this protein was critical to protect cells from this peroxide. Although, An2205+ did not show increased capability to withstand cadmium stress, An2205C41S+ was more susceptible to this heavy metal. This is the first study that provides a vital understanding into the function of atypical thioredoxins in countering the toxic effects of heavy metals/H2O2 in prokaryotes.