The mechanisms governing atlastin-mediated membrane fusion are unknown. Here we demonstrate that a three-helix bundle (3HB) within the middle domain is required for oligomerization. Mutation of core hydrophobic residues within these helices inactivates atlastin function by preventing membrane tethering and the subsequent fusion. GTP binding induces a conformational change that reorients the GTPase domain relative to the 3HB to permit self-association, but the ability to hydrolyze GTP is required for full fusion, indicating that nucleotide binding and hydrolysis play distinct roles. Oligomerization of atlastin stimulates its ability to hydrolyze GTP, and the energy released drives lipid bilayer merger. Mutations that prevent atlastin self-association also abolish oligomerization-dependent stimulation of GTPase activity. Furthermore, increasing the distance of atlastin complex formation from the membrane inhibits fusion, suggesting that this distance is crucial for atlastin to promote fusion.