The budding yeast Sir2 (silent information regulator 2) protein is the founding member of the sirtuin family of NAD-dependent histone/protein deacetylases. Its function in transcriptional silencing requires both the highly conserved catalytic domain and a poorly understood N-terminal regulatory domain (Sir2N). We determined the structure of Sir2 in complex with a fragment of Sir4, a component of the transcriptional silencing complex in Saccharomyces cerevisiae. The structure shows that Sir4 is anchored to Sir2N and contacts the interface between the Sir2N and the catalytic domains through a long loop. We discovered that the interaction between the Sir4 loop and the interdomain interface in Sir2 is critical for allosteric stimulation of the deacetylase activity of Sir2. These results bring to light the structure and function of the regulatory domain of Sir2, and the knowledge should be useful for understanding allosteric regulation of sirtuins in general.