When not bound to cargo, the motor protein kinesin is in an inhibited state that has low microtubule-stimulated ATPase activity. Inhibition serves to minimize the dissipation of ATP and to prevent mislocalization of kinesin in the cell. Here we show that this inhibition is relieved when kinesin binds to an artificial cargo. Inhibition is mediated by kinesin's tail domain: deletion of the tail activates the ATPase without need of cargo binding, and inhibition is re-established by addition of exogenous tall peptide. Both ATPase and motility assays indicate that the tail does not prevent kinesin from binding to microtubules, but rather reduces the motor's stepping rate.