An important defense against viral infection involves inhibition of translation by PKR phosphorylation of the alpha subunit of eIF2. Binding of viral dsRNAs to two dsRNA-binding domains (dsRBDs) in PKR leads to relief of an inhibitory region and activation of eIF2 kinase activity. Interestingly, while deletion of the regulatory region of PKR significantly induces activity in vitro, the truncated kinase does not inhibit translation in vivo, suggesting that these sequences carry out additional functions required for PKR control. To delineate these functions and determine the order of events leading to activation of PKR, we fused truncated PKR to domains of known function and assayed the chimeras for in vivo activity. We found that fusion of a heterologous dimerization domain with the PKR catalytic domain enhanced autophosphorylation and eIF2 kinase function in vivo. The dsRBDs also mediate ribosome association and we proposed that such targeting increases the localized concentration of PKR, enhancing interaction between PKR molecules. We addressed this premise by linking the truncated PKR to RAS sequences mediating farnesylation and membrane localization and found that the fusion protein was functional in vivo. These results indicate that cellular localization along with oligomerization enhances interaction between PKR molecules. Alanine substitution for the phosphorylation site, threonine 446, impeded in vivo and in vitro activity of the PKR fusion proteins, while aspartate or glutamate substitutions partially restored the function of the truncated kinase. These results indicate that both dimerization and cellular localization play a role in transient protein-protein interactions and that trans-autophosphorylation is the final step in the mechanism of activation of PKR.