Pannexins (Panx1-3) are members of the emerging large-pore channel family. Their ubiquitous expression and ability to release small signaling molecules such as ATP has implicated pannexins in a host of critical cell signaling roles. However, the stimulus which impinges upon pannexin itself to reversibly open the channel gate remains elusive despite over 20 years of research into these enigmatic channels. Additionally, though there are over two dozen deposited structures obtained with various experimental manipulations, the molecular mechanism of pannexin channel gating is still largely unresolved. We previously observed that pannexins can be activated by synthetic small molecules and hypothesized that pannexins may also be opened by naturally occurring small molecule ligands. Using a combination of patch clamp electrophysiology, chemical fractionation of mouse tissues, mass spectrometry, liposome reconstitution, and a high-throughput screening assay, we found and defined a class of endogenous lipid molecules that function as bona fide agonists of Panx1 and Panx2. To better understand the gating mechanism, we used protein engineering, cryo-electron microscopy, and patch clamp to discover a previously undefined domain in the Panx1 C-terminus, dubbed "C-terminal activating domain (CAD)" that is essential for channel activation. Integrating these findings with the available Panx1 structures offered a tentative basis for the first general Panx1 activation mechanism, wherein the CAD displaces the distal N-terminus by competing for a common binding site, leading to channel activation.