The evolutionarily conserved cohesin complex mediates sister chromatid cohesion and facilitates mitotic chromosome condensation, DNA repair, and transcription regulation. These biological functions require cohesin's two ATPases, formed by the Smc1p and Smc3p subunits. Cohesin's ATPase activity is stimulated by the Scc2p auxiliary factor. This stimulation is inhibited by Eco1p acetylation of Smc3p at an interface with Scc2p. It was unclear how cohesin's ATPase activity is stimulated by Scc2p or how acetylation inhibits Scc2p, given that the acetylation site is distal to cohesin's ATPase active sites. Here, we identify mutations in budding yeast that suppressed the in vivo defects caused by Smc3p acetyl-mimic and acetyl-defective mutations. We provide compelling evidence that Scc2p activation of cohesin ATPase depends on an interface between Scc2p and a region of Smc1p proximal to cohesin's Smc3p ATPase active site. Furthermore, substitutions at this interface increase or decrease ATPase activity to overcome ATPase modulation by acetyl-mimic and acetyl-null mutations. Using these observations and an existing cryo-EM structure, we propose a model for regulating cohesin ATPase activity. We suggest that Scc2p binding to Smc1p causes the adjacent Smc1p residues and ATP to shift, stimulating Smc3p's ATPase. This stimulatory shift is inhibited through acetylation of the distal Scc2p-Smc3p interface.