The Escherichia coli Hsp40 DnaJ uses its J-domain to target substrate polypeptides for binding to the Hsp70 DnaK, but the mechanism of J-domain function has been obscured by a substrate-like interaction between DnaJ and DnaK. ATP hydrolysis in DnaK is associated with a conformational change that captures the substrate, and both DnaJ and substrate can stimulate ATP hydrolysis. However, substrates cannot trigger capture by DnaK in the presence of ATP, and substrates stimulate a DnaK conformational change that is uncoupled from ATP hydrolysis. The role of the J-domain was examined using the fluorescent derivative of a fusion protein composed of the J-domain and a DnaK-binding peptide. In the absence of ATP, DnaK-binding affinity of the fusion protein is similar to that of the unfused peptide. However, in the presence of ATP, the affinity of the fusion protein is dramatically increased, which is opposite to the decrease in DnaK affinity typically exhibited by peptides. Binding of a fusion protein that contains a defective J-domain is insensitive to ATP. According to results from isothermal titration calorimetry, the J-domain binds to the DnaK ATPase domain with weak affinity (K(D) = 23 microM at 20 degrees C). The interaction is characterized by a positive enthalpy, small heat capacity change (DeltaC(p)= -33 kcal mol(-1)), and increasing binding affinity for increasing temperatures in the physiological range. In conditions that support binding of the J-domain to the ATPase domain, the J-domain accelerates ATP hydrolysis and a simultaneous conformational change in DnaK that is associated with peptide capture. The defective J-domain is inactive, despite the fact that it binds to the DnaK ATPase domain with higher than wild-type affinity. The results are most consistent with an allosteric mechanism of J-domain action in which the J-domain couples ATP hydrolysis to peptide capture by accelerating ATP hydrolysis and delaying DnaK closure until ATP is hydrolyzed.