ATM (ataxia telangiectasia mutated) is required for the early response to DNA-damaging agents such as ionizing radiation (IR) that induce DNA double-strand breaks. Cells deficient in ATM are extremely sensitive to IR. It has been shown that IR induces immediate phosphorylation of ATM at Ser(1981), leading to catalytic activation of the protein. We recently isolated a novel BRCA1-associated protein, BAAT1 (BRCA1-associated protein required for ATM activation-1), by yeast two-hybrid screening and found that BAAT1 also binds to ATM, localizes to double-strand breaks, and is required for Ser(1981) phosphorylation of ATM. Small interfering RNA-mediated stable or transient reduction of BAAT1 resulted in decreased phosphorylation of both ATM at Ser(1981) and CHK2 at Thr(68). Treatment of BAAT1-depleted cells with okadaic acid greatly restored phosphorylation of ATM at Ser(1981), suggesting that BAAT1 is involved in the regulation of ATM phosphatase. Protein phosphatase 2A-mediated dephosphorylation of ATM was partially blocked by purified BAAT1 in vitro. Significantly, acute loss of BAAT1 resulted in increased p53, leading to apoptosis. These results demonstrate that DNA damage-induced ATM activation requires a coordinated assembly of BRCA1, BAAT1, and ATM.