In this report, we establish that Drosophila ADAR (adenosine deaminase acting on RNA) forms a dimer on double-stranded (ds) RNA, a process essential for editing activity. The minimum region required for dimerization is the N-terminus and dsRNA-binding domain 1 (dsRBD1). Single point mutations within dsRBD1 abolish RNA-binding activity and dimer formation. These mutations and glycerol gradient analysis indicate that binding to dsRNA is important for dimerization. However, dimerization can be uncoupled from dsRNA-binding activity, as a deletion of the N-terminus (amino acids 1-46) yields a monomeric ADAR that retains the ability to bind dsRNA but is inactive in an editing assay, demonstrating that ADAR is only active as a dimer. Different isoforms of ADAR with different editing activities can form heterodimers and this can have a significant effect on editing in vitro as well as in vivo. We propose a model for ADAR dimerization whereby ADAR monomers first contact dsRNA; however, it is only when the second monomer binds and a dimer is formed that deamination occurs.