p21-activated kinases (Pak)/Ste20 kinases are regulated in vitro and in vivo by the small GTP-binding proteins Rac and Cdc42 and lipids, such as sphingosine, which stimulate autophosphorylation and phosphorylation of exogenous substrates. The mechanism of Pak activation by these agents remains unclear. We investigated Pak kinase activation in more detail to gain insight into the interplay between the GTPase/sphingosine binding, an intramolecular inhibitory interaction, and autophosphorylation. We present biochemical evidence that an autoinhibitory domain (ID) contained within amino acid residues 67-150 of Pak1 interacts with the carboxyl-terminal kinase domain and that this interaction is regulated in a GTPase-dependent fashion. Cdc42- and sphingosine-stimulated Pak1 activity can be inhibited in trans by recombinant ID peptide, indicating similarities in their mode of activation. However, Pak1, which was autophosphorylated in response to either GTPase or sphingosine, is highly active and is insensitive to inhibition by the ID peptide. We identified phospho-acceptor site threonine 423 in the kinase activation loop as a critical determinant for the sensitivity to autoinhibition and enzymatic activity. Phosphorylation studies suggested that the stimulatory effect of both GTPase and sphingosine results in exposure of the activation loop, making it accessible for intermolecular phosphorylation.