Two autophagy-related ubiquitin-like systems have unique features: the E2 enzyme Atg3 conjugates the ubiquitin-like protein Atg8 to the lipid phosphatidylethanolamine, and the other ubiquitin-like protein conjugate Atg12-Atg5 promotes that conjugase activity of Atg3. Here, we elucidate the mode of this action of Atg12-Atg5 as a new E3 enzyme by using Saccharomyces cerevisiae proteins. Biochemical analyses based on structural information suggest that Atg3 requires a threonine residue to catalyze the conjugation reaction instead of the typical asparagine residue used by other E2 enzymes. Moreover, the catalytic cysteine residue of Atg3 is arranged in the catalytic center such that the conjugase activity is suppressed; Atg12-Atg5 induces a reorientation of the cysteine residue toward the threonine residue, which enhances the conjugase activity of Atg3. Thus, this study reveals the mechanism of the key reaction that drives membrane biogenesis during autophagy.