ClpA, a newly discovered ATP-dependent molecular chaperone, remodels bacteriophage P1 RepA dimers into monomers, thereby activating the latent specific DNA binding activity of RepA. We investigated the mechanism of the chaperone activity of ClpA by dissociating the reaction into several steps and determining the role of nucleotide in each step. In the presence of ATP or a nonhydrolyzable ATP analog, the initial step is the self-assembly of ClpA and its association with inactive RepA dimers. ClpA-RepA complexes form rapidly and at 0°C but are relatively unstable. The next step is the conversion of unstable ClpA-RepA complexes into stable complexes in a time- and temperature-dependent reaction. The transition to stable ClpA-RepA complexes requires binding of ATP, but not ATP hydrolysis, because nonhydrolyzable ATP analogs satisfy the nucleotide requirement. The stable complexes contain approximately 1 mol of RepA dimer per mol of ClpA hexamer and are committed to activating RepA. In the last step of the reaction, active RepA is released upon exchange of ATP with the nonhydrolyzable ATP analog and ATP hydrolysis. Importantly, we discovered that one cycle of RepA binding to ClpA followed by ATP-dependent release is sufficient to convert inactive RepA to its active form.