G protein-coupled receptors (GPCRs) can form dimeric or oligomeric complexes in vivo. However, the functions and mechanisms of oligomerization remain poorly understood for most GPCRs, including the alpha-factor receptor (STE2 gene product) of the yeast Saccharomyces cerevisiae. Here we provide evidence indicating that alpha-factor receptor oligomerization involves a GXXXG motif in the first transmembrane domain (TM1), similar to the transmembrane dimerization domain of glycophorin A. Results of fluorescence resonance energy transfer, fluorescence microscopy, endocytosis assays of receptor oligomerization in living cells, and agonist binding assays indicated that amino acid substitutions affecting the glycine residues of the GXXXG motif impaired alpha-factor receptor oligomerization and biogenesis in vivo but did not significantly impair agonist binding affinity. Mutant receptors exhibited signaling defects that were not due to impaired cell surface expression, indicating that oligomerization promotes alpha-factor receptor signal transduction. Structure-function studies suggested that the GXXXG motif in TM1 of the alpha-factor receptor promotes oligomerization by a mechanism similar to that used by the GXXXG dimerization motif of glycophorin A. In many mammalian GPCRs, motifs related to the GXXXG sequence are present in TM1 or other TM domains, suggesting that similar mechanisms are used by many GPCRs to form dimers or oligomeric arrays.