Store-operated Ca²⁺ channels activated by the depletion of Ca²⁺ from the endoplasmic reticulum (ER) are a major Ca²⁺ entry pathway in nonexcitable cells and are essential for T cell activation and adaptive immunity. After store depletion, the ER Ca²⁺ sensor STIM1 and the CRAC channel protein Orai1 redistribute to ER-plasma membrane (PM) junctions, but the fundamental issue of how STIM1 activates the CRAC channel at these sites is unresolved. Here, we identify a minimal, highly conserved 107-aa CRAC activation domain (CAD) of STIM1 that binds directly to the N and C termini of Orai1 to open the CRAC channel. Purified CAD forms a tetramer that clusters CRAC channels, but analysis of STIM1 mutants reveals that channel clustering is not sufficient for channel activation. These studies establish a molecular mechanism for store-operated Ca²⁺ entry in which the direct binding of STIM1 to Orai1 drives the accumulation and the activation of CRAC channels at ER-PM junctions.