Abscisic acid (ABA) is an important phytohormone that regulates plant stress responses. Proteins from the PYR-PYL-RCAR family were recently identified as ABA receptors. Upon binding to ABA, a PYL protein associates with type 2C protein phosphatases (PP2Cs) such as ABI1 and ABI2, inhibiting their activity; the molecular mechanisms by which PYLs mediate ABA signaling remain unknown, however. Here we report three crystal structures: apo-PYL2, (+)-ABA-bound PYL2 and (+)-ABA-bound PYL1 in complex with phosphatase ABI1. Apo-PYL2 contains a pocket surrounded by four highly conserved surface loops. In response to ABA binding, loop CL2 closes onto the pocket, creating a surface that recognizes ABI1. In the ternary complex, the CL2 loop is located near the active site of ABI1, blocking the entry of substrate proteins. Together, our data reveal the mechanisms by which ABA regulates PYL-mediated inhibition of PP2Cs.