Abstract: BACKGROUND: Cohesion between sister chromatids is promoted by the chromosomal cohesin complex that forms a proteinaceous ring, large enough in principle to embrace two sister strands. The mechanism by which cohesin binds to DNA, and how sister chromatid cohesion is established, is unknown. RESULTS: Biochemical studies of cohesin have largely been limited to protein isolated from soluble cellular fractions. Here, we characterize cohesin purified from budding yeast chromatin, suggesting that chromosomal cohesin is sufficiently described by its known distinctive ring structure. We present evidence that the two Smc subunits of cohesin by themselves form a ring, closed at interacting ATPase head domains. A motif in the Smc1 subunit implicated in ATP hydrolysis is essential for loading cohesin onto DNA. In addition to functional ATPase heads, an intact cohesin ring structure is indispensable for DNA binding, suggesting that ATP hydrolysis may be coupled to DNA transport into the cohesin ring. DNA is released in anaphase when separase cleaves cohesin's Scc1 subunit. We show that a cleavage fragment of Scc1 disrupts the interaction between the two Smc heads, thereby opening the ring. CONCLUSIONS: We present a model for cohesin binding to chromatin by ATP hydrolysis-dependent transport of DNA into the cohesin ring. After DNA replication, two DNA strands may be trapped to promote sister chromatid cohesion. In anaphase, Scc1 cleavage opens the ring to release sister chromatids.