The core particle (CP) of the yeast proteasome is composed of four heptameric rings of subunits arranged in a hollow, barrel-like structure. We have found that the CP is autoinhibited by the N-terminal tails of the outer (alpha) ring subunits. Crystallographic analysis showed that deletion of the tail of the alpha3 subunit opens a channel into the proteolytically active interior chamber of the CP, thus derepressing peptide hydrolysis. In the latent state of the particle, the tails prevent substrate entry by imposing topological closure on the CP. Inhibition by the alpha subunit tails is relieved upon binding of the regulatory particle to the CP to form the proteasome holoenzyme. Opening of the CP channel by assembly of the holoenzyme is regulated by the ATPase domain of Rpt2, one of 17 subunits in the RP. Thus, open-channel mutations in CP subunits suppress the closed-channel phenotype of an rpt2 mutant. These results identify a specific mechanism for allosteric regulation of the CP by the RP.