Iron-sulfur (Fe-S) clusters are essential cofactors required for the activity of numerous proteins involved in fundamental cellular processes, including DNA replication, metabolism and mitochondrial respiration. In eukaryotes, Fe-S cluster biogenesis is initiated in mitochondria by the ISC machinery, which assembles iron and sulfur, delivered by a cysteine desulfurase, onto the scaffold protein ISCU. Frataxin (FXN), a key regulator of this pathway, enhances Fe-S production by accelerating persulfide transfer to ISCU. FXN is essential in eukaryotes, and its loss results in petite phenotype in yeast, senescence in dividing mammalian cells and embryonic lethality in mice. Interestingly, in yeast, a methionine to isoleucine substitution at position 141 of the scaffold protein Isu1 can bypass the requirement of FXN. To test whether this bypass mechanism is conserved in mammals, we introduced the equivalent M141I substitution into the endogenous Iscu gene in murine fibroblasts carrying a conditional Fxn allele using CRISPR-Cas9. We show that the ISCU M141I variant enables cell survival in the absence of FXN, preventing cell cycle arrest and decreasing baseline DNA damage. However, these FXN-null survivor clones exhibit slower proliferation, persistent mitochondrial dysfunction and defective mitochondrial Fe-S cluster proteins. In contrast, nuclear and cytosolic Fe-S proteins are preserved, as is cellular iron homeostasis. Importantly, the ISCU M141I variant delays, but does not fully rescue, embryonic lethality in Fxn-deficient mice. Altogether, our results reveal a previously unrecognized compartment-specific rescue of Fe-S cluster dependent processes by the ISCU M141I variant in mammalian cells, raising for the first time the possibility of compartmental regulation of Fe-S cluster biogenesis.