TMEM16A is a widely expressed Ca-activated Cl channel that regulates crucial physiological functions including fluid secretion, neuronal excitability, and smooth muscle contraction. There is a critical need to understand the molecular mechanisms of TMEM16A gating and regulation. However, high-resolution TMEM16A structures have failed to reveal an activated state with an unobstructed permeation pathway even with saturating Ca. This has been attributed to the requirement of PIP for preventing TMEM16A desensitization. Here, atomistic simulations show that specific binding of PIP to TMEM16A can lead to spontaneous opening of the permeation pathway in the Ca-bound state. The predicted activated state is highly consistent with a wide range of mutagenesis and functional data. It yields a maximal Cl conductance of ~1 pS, similar to experimental estimates, and recapitulates the selectivity of larger SCN over Cl. The resulting molecular mechanism of activation provides a basis for understanding the interplay of multiple signals in controlling TMEM16A channel function.