TonEBP (NFAT5) is a newly identified member of the Rel family of transcriptional activators that include NF-κB and NFAT1 to NFAT4. Activated in response to hypertonicity, TonEBP stimulates transcription of transporters of organic osmolytes, certain cytokines, and a molecular chaperone. We provide biochemical data demonstrating that full-length TonEBP dimerizes via the C-terminus of the Rel-homology domain (CRHD). The two polyglutamine motifs were not involved. The dimerization was not affected by nucleocytoplasmic shifts in TonEBP in response to changes in ambient tonicity. Preventing the dimer formation by deleting the CRHD did not affect the nucleocytoplasmic shifts. On the other hand, deletion of the CRHD prevented DNA binding and eliminated the dominant negative activity of a C-terminal truncated TonEBP. Furthermore, phosphorylation was dramatically reduced especially in hypertonic conditions by deletion of the CRHD. We conclude that dimerization is required for proper phosphorylation of TonEBP as well as DNA binding.