The biogenesis and maintenance of the endoplasmic reticulum (ER) requires membrane fusion. ER homotypic fusion is driven by the large GTPase atlastin. Domain analysis of atlastin shows that a conserved region of the C-terminal cytoplasmic tail is absolutely required for fusion activity. Atlastin in adjacent membranes must associate to bring the ER membranes into molecular contact. Drosophila atlastin dimerizes in the presence of GTPγS but is monomeric with GDP or without nucleotide. Oligomerization requires the juxtamembrane middle domain three-helix bundle, as does efficient GTPase activity. A soluble version of the N-terminal cytoplasmic domain that contains the GTPase domain and the middle domain three-helix bundle serves as a potent, concentration-dependent inhibitor of membrane fusion both in vitro and in vivo. However, atlastin domains lacking the middle domain are without effect. GTP-dependent dimerization of atlastin generates an enzymatically active protein that drives membrane fusion after nucleotide hydrolysis and conformational reorganization.