Cytoplasmic dynein-1 (dynein) is the primary motor for the retrograde transport of intracellular cargoes along microtubules. The activation of the dynein transport machinery requires the opening of its autoinhibited Phi conformation by Lis1 and Nde1/Ndel1, but the underlying mechanism remains unclear. Using biochemical reconstitution and cryo-electron microscopy, we show that Nde1 significantly enhances Lis1 binding to autoinhibited dynein and facilitates the opening of Phi. We discover a key intermediate step in the dynein activation pathway where a single Lis1 dimer binds between the Phi-like (Phi) motor rings of dynein. In this "Phi-Lis1", Lis1 interacts with one of the motor domains through its canonical interaction sites at the AAA+ ring and stalk and binds to the newly identified AAA5, AAA6, and linker regions of the other motor domain. Mutagenesis and motility assays confirm the critical role of the Phi-Lis1 interface. This intermediate state is instantly and efficiently formed in the presence of Nde1, but Nde1 is not part of the Phi-Lis1. These findings provide key insights into the mechanism of how Nde1 promotes the Lis1-mediated opening of Phi dynein.