p97/Cdc48 is a hexameric AAA ATPase in which each monomer consists of an N-terminal domain (NTD) and two ATPase domains (D1 and D2), which cooperate in substrate recruitment and processing. In vitro experiments and cryo-EM structures of p97 and its cofactor, Ufd1/Npl4 (UN), revealed mechanistic insights regarding substrate processing. Yet, dynamics and the intermediate structures of the related ATPase cycle upon UN binding remain unresolved. Using novel mutations, we captured two discrete functional conformations associated with specific nucleotide states: a functional conformation in which D1 protomers are ATP bound, while the D2 subunits are in the ADP state. A configuration that is presumably required for the initial substrate engagement with the D2 pore. We also report on a heterologous nucleotide state within the D1 ring in which only 2NTDs are in the “up” ATP state. Based on the elevated affinity and structural insights, we propose that this conformation favors UN binding. Further analysis suggests that p97-UN complex formation entails a two-state mechanism. Initially, UN binds p97's non-symmetrical conformation (2NTDs in an "up" state), this association promotes a structural transition upon which five NTDs shift to an "up" state and are poised to bind ATP. The UBXL domain of Npl4 selectively binds p97's downed NTD demonstrating a new conformation that may introduce directionality to incoming substrate.