All ubiquitin‐like proteins (UBLs) undergo an activation process before their conjugation to target proteins. Although the steps required for the activation of UBLs are conserved and common to all UBLs, we have previously shown that the activation of the UBL, ubiquitin fold modifier 1 (UFM1) by the E1, Ufm1 modifier‐activating enzyme 5 (UBA5) is executed in a trans‐binding mechanism, not observed in any other E1. In this study, we explored the necessity of that mechanism for UFM1 activation and found that it is needed not only for UFM1 binding to UBA5 but also for stabilizing the UBA5 homodimer. Although UBA5 functions as a dimer, in solution it behaves as a weak dimer. Dimerization of UBA5 is required for ATP binding; therefore, stabilization of the dimer by UFM1 enhances ATP binding. Our results make a connection between the binding of UFM1 to UBA5 and the latter's affinity to ATP, so we propose a novel mechanism for the regulation of ATP's binding to E1.—Mashahreh, B., Hassouna, F., Soudah, N., Cohen‐Kfir, E., Strulovich, R., Haitin, Y., Wiener, R. Trans‐binding of UFM1 to UBA5 stimulates UBA5 homodimerization and ATP binding. FASEB J. 32,2794–2802 (2018). www.fasebj.org