During biosynthesis of [NiFe]-hydrogenase 2 (Hyd-2) of Escherichia coli, a 15-amino-acid C-terminal peptide is cleaved from the catalytic large subunit precursor, pro-HybC. This peptide is removed only after NiFe(CN)2CO cofactor insertion by the Hyp accessory protein machinery has been completed, suggesting that it has a regulatory function during enzyme maturation. We show here that in hyp mutants that fail to synthesize and insert the NiFe cofactor, and therefore retain the peptide, the Tat (twin-arginine translocon) signal peptide on the small subunit HybO is not removed and the subunit is degraded. In a mutant lacking the large subunit, the Tat signal peptide was also not removed from pre-HybO, indicating that the mature large subunit must actively engage the small subunit to elicit Tat transport. We validated the proposed regulatory role of the C-terminal peptide in controlling enzyme assembly by genetically removing it from the precursor of HybC, which allowed assembly and Tat-dependent membrane association of a HybC-HybO heterodimer lacking the NiFe(CN)2CO cofactor. Finally, genetic transfer of the C-terminal peptide from pro-HyaB, the large subunit of Hyd-1, onto HybC did not influence its dependence on the accessory protein HybG, a HypC paralog, or the specific protease HybD. This indicates that the C-terminal peptide per se is not required for interaction with the Hyp machinery but rather suggests a role of the peptide in maintaining a conformation of the protein suitable for cofactor insertion. Together, our results demonstrate that the C-terminal peptide on the catalytic subunit controls biosynthesis, assembly, and membrane association of Hyd-2. [NiFe]-hydrogenases are multisubunit enzymes with a catalytic subunit containing a NiFe(CN)2CO cofactor. Results of previous studies suggested that after synthesis and insertion of the cofactor by the Hyp accessory proteins, this large subunit changes conformation upon proteolytic removal of a short peptide from its C terminus. We show that removal of this peptide is necessary to allow the cleavage of the Tat signal peptide from the small subunit with concomitant membrane association of the heterodimer to occur. Genetic removal of the C-terminal peptide from the large subunit allowed productive interaction with the small subunit and Tat-dependent membrane insertion of a NiFe cofactor-free enzyme. Results based on swapping of C-terminal peptides between hydrogenases suggest that this peptide governs enzyme assembly via a conformational switch.