TLR2 in association with TLR1 or TLR6 plays an important role in the innate immune response by recognizing microbial lipoproteins and lipopeptides. Here we present the crystal structures of the human TLR1-TLR2-lipopeptide complex and of the mouse TLR2-lipopeptide complex. Binding of the tri-acylated lipopeptide, Pam₃CSK₄, induced the formation of an "m" shaped heterodimer of the TLR1 and TLR2 ectodomains whereas binding of the di-acylated lipopeptide, Pam₂CSK₄, did not. The three lipid chains of Pam₃CSK₄ mediate the heterodimerization of the receptor; the two ester-bound lipid chains are inserted into a pocket in TLR2, while the amide-bound lipid chain is inserted into a hydrophobic channel in TLR1. An extensive hydrogen-bonding network, as well as hydrophobic interactions, between TLR1 and TLR2 further stabilize the heterodimer. We propose that formation of the TLR1-TLR2 heterodimer brings the intracellular TIR domains close to each other to promote dimerization and initiate signaling.