To investigate the role of each domain in BiP/GRP78 function, we have used a full-length recombinant BiP engineered to contain two enterokinase sites; one site is located after an N-terminal FLAG epitope, and a second site has been inserted at the junction between the N- and C-terminal domains (FLAG-BiP.ent). FLAG-BiP.ent oligomerizes into multiple species that interconvert with each other in a slow, concentration- and temperature-dependent equilibrium. Binding of ATP or AMP-PNP (adenosine 5'-(beta, gamma-imino)triphosphate), but not ADP, or of a peptidic substrate induces depolymerization of FLAG-BiP.ent and stabilization of monomeric species. Enterokinase cleavage of monomeric, nucleotide-free BiP.ent results in the physical dissociation of the 44-kDa N-terminal ATPase fragment (N44.ent) from the 30-kDa C-terminal substrate binding domain (C30.ent). Upon dissociation, the freed C-terminal substrate binding domain readily undergoes self-association while N44.ent remains monomeric. Enterokinase cleavage performed in the presence of a synthetic peptide prevents oligomerization of the freed C30.ent domain. Addition of ATP during enterokinase cleavage has no effect on C30.ent oligomerization. Our data clearly indicate that binding of a specific peptide onto the C-terminal domain, or ATP onto the N-terminal domain, induces internal conformational change(s) within the C30 domain that result(s) in BiP depolymerization.