The DnaK and DnaJ heat shock proteins function as the primary Hsp70 and Hsp40 homologues, respectively, of Escherichia coli. Intensive studies of various Hsp70 and DnaJ-like proteins over the past decade have led to the suggestion that interactions between specific pairs of these two types of proteins permit them to serve as molecular chaperones in a diverse array of protein metabolic events, including protein folding, protein trafficking, and assembly and disassembly of multisubunit protein complexes. To further our understanding of the nature of Hsp70-DnaJ interactions, we have sought to define the minimal sequence elements of DnaJ required for stimulation of the intrinsic ATPase activity of DnaK. As judged by proteolysis sensitivity, DnaJ is composed of three separate regions, a 9-kDa NH2-terminal domain, a 30-kDa COOH-terminal domain, and a protease-sensitive glycine- and phenylalanine-rich (G/F-rich) segment of 30 amino acids that serves as a flexible linker between the two domains. The stable 9-kDa proteolytic fragment was identified as the highly conserved J-region found in all DnaJ homologues. Using this structural information as a guide, we constructed, expressed, purified, and characterized several mutant DnaJ proteins that contained either NH2-terminal or COOH-terminal deletions. At variance with current models of DnaJ action, DnaJ1-75, a polypeptide containing an intact J-region, was found to be incapable of stimulating ATP hydrolysis by DnaK protein. We found, instead, that two sequence elements of DnaJ, the J-region and the G/F-rich linker segment, are each required for activation of DnaK-mediated ATP hydrolysis and for minimal DnaJ function in the initiation of bacteriophage lambda DNA replication. Further analysis indicated that maximal activation of ATP hydrolysis by DnaK requires two independent but simultaneous protein-protein interactions: (i) interaction of DnaK with the J-region of DnaJ and (ii) binding of a peptide or polypeptide to the polypeptide-binding site associated with the COOH-terminal domain of DnaK. This dual signaling process required for activation of DnaK function has mechanistic implications for those protein metabolic events, such as polypeptide translocation into the endoplasmic reticulum in eukaryotic cells, that are dependent on interactions between Hsp70-like and DnaJ-like proteins.