AMP-activated protein kinase (AMPK) plays a key role in maintaining energy homeostasis. Activation of AMPK in peripheral tissues has been shown to alleviate the symptoms of metabolic diseases, such as type 2 diabetes, and consequently AMPK is a target for treatment of these diseases. Recently, a small molecule activator (A-769662) of AMPK was identified that had beneficial effects on metabolism in ob/ob mice. Here we show that A-769662 activates AMPK both allosterically and by inhibiting dephosphorylation of AMPK on Thr-172, similar to the effects of AMP. A-769662 activates AMPK harboring a mutation in the gamma subunit that abolishes activation by AMP. An AMPK complex lacking the glycogen binding domain of the beta subunit abolishes the allosteric effect of A-769662 but not the allosteric activation by AMP. Moreover, mutation of serine 108 to alanine, an autophosphorylation site within the glycogen binding domain of the beta1 subunit, almost completely abolishes activation of AMPK by A-769662 in cells and in vitro, while only partially reducing activation by AMP. Based on our results we propose a model for activation of AMPK by A-769662. Importantly, this model may provide clues for understanding the mechanism by which AMP leads to activation of AMPK, which in turn may help in the identification of other AMPK activators.