G protein-coupled receptors (GPCRs) can form homodimers/oligomers and/or heterodimers/oligomers. The mechanisms used to form specific GPCR oligomers are poorly understood because the domains that mediate such interactions and the step(s) in the secretory pathway where oligomerization occurs have not been well characterized. Here we have used subcellular fractionation and fluorescence resonance energy transfer (FRET) experiments to show that oligomerization of a GPCR (α-factor receptor; STE2 gene product) of the yeast Saccharomyces cerevisiae occurs in the endoplasmic reticulum. To identify domains of this receptor that mediate oligomerization, we used FRET and endocytosis assays of oligomerization in vivo to analyze receptor deletion mutants. A mutant lacking the N-terminal extracellular domain and transmembrane (TM) domain 1 was expressed at the cell surface but did not self-associate. In contrast, a receptor fragment containing only the N-terminal extracellular domain and TM1 could self-associate and heterodimerize with wild type receptors. Analysis of other mutants suggested that oligomerization is facilitated by the N-terminal extracellular domain and TM2. Therefore, the N-terminal extracellular domain, TM1, and TM2 appear to stabilize α-factor receptor oligomers. These domains may form an interface in contact or domain-swapped oligomers. Similar domains may mediate dimerization of certain mammalian GPCRs.