Autophagy depends on the E2 enzyme, Atg3, functioning in a conserved E1-E2-E3 trienzyme cascade that catalyzes lipidation of Atg8-family ubiquitin-like proteins (UBLs). Molecular mechanisms underlying Atg8 lipidation remain poorly understood despite association of Atg3, the E1 Atg7, and the composite E3 Atg12-Atg5-Atg16 with pathologies including cancers, infections and neurodegeneration. Here, studying yeast enzymes, we report that an Atg3 element we term E123IR (E1, E2, and E3-interacting region) is an allosteric switch. NMR, biochemical, crystallographic and genetic data collectively indicate that in the absence of the enzymatic cascade, the Atg3E123IR makes intramolecular interactions restraining Atg3's catalytic loop, while E1 and E3 enzymes directly remove this brace to conformationally activate Atg3 and elicit Atg8 lipidation in vitro and in vivo. We propose that Atg3's E123IR protects the E2~UBL thioester bond from wayward reactivity toward errant nucleophiles, while Atg8 lipidation cascade enzymes induce E2 active site remodeling through an unprecedented mechanism to drive autophagy.