The protein kinase DAI is activated upon viral infection of mammalian cells and inhibits protein synthesis by phosphorylation of the alpha subunit of translation initiation factor 2 (eIF-2 alpha). DAI is activated in vitro by double-stranded RNAs (dsRNAs), and binding of dsRNA is dependent on two copies of a conserved sequence motif located N terminal to the kinase domain in DAI. High-level expression of DAI in Saccharomyces cerevisiae cells is lethal because of hyperphosphorylation of eIF-2 alpha; at lower levels, DAI can functionally replace the protein kinase GCN2 and stimulate translation of GCN4 mRNA. These two phenotypes were used to characterize structural requirements for DAI function in vivo, by examining the effects of amino acid substitutions at matching positions in the two dsRNA-binding motifs and of replacing one copy of the motif with the other. We found that both copies of the dsRNA-binding motif are required for high-level kinase function and that the N-terminal copy is more important than the C-terminal copy for activation of DAI in S. cerevisiae. On the basis of these findings, we conclude that the requirements for dsRNA binding in vitro and for activation of DAI kinase function in vivo closely coincide. Two mutant alleles containing deletions of the first or second binding motif functionally complemented when coexpressed in yeast cells, strongly suggesting that the active form of DAI is a dimer. In accord with this conclusion, overexpression of four catalytically inactive alleles containing different deletions in the protein kinase domain interfered with wild-type DAI produced in the same cells. Interestingly, three inactivating point mutations in the kinase domain were all recessive, suggesting that dominant interference involves the formation of defective heterodimers rather than sequestration of dsRNA activators by mutant enzymes. We suggest that large structural alterations in the kinase domain impair an interaction between the two protomers in a DAI dimer that is necessary for activation by dsRNA or for catalysis of eIF-2 alpha phosphorylation.