Focal adhesion kinase (FAK) controls adhesion-dependent cell motility, survival, and proliferation. FAK has kinase-dependent and kinase-independent functions, both of which play major roles in embryogenesis and tumor invasiveness. The precise mechanisms of FAK activation are not known. Using x-ray crystallography, small angle x-ray scattering, and biochemical and functional analyses, we show that the key step for activation of FAK's kinase-dependent functions--autophosphorylation of tyrosine-397--requires site-specific dimerization of FAK. The dimers form via the association of the N-terminal FERM domain of FAK and are stabilized by an interaction between FERM and the C-terminal FAT domain. FAT binds to a basic motif on FERM that regulates co-activation and nuclear localization. FAK dimerization requires local enrichment, which occurs specifically at focal adhesions. Paxillin plays a dual role, by recruiting FAK to focal adhesions and by reinforcing the FAT:FERM interaction. Our results provide a structural and mechanistic framework to explain how FAK combines multiple stimuli into a site-specific function. The dimer interfaces we describe are promising targets for blocking FAK activation.