Atg8 is conjugated to phosphatidylethanolamine (PE) by ubiquitin‐like conjugation reactions. Atg8 has at least two functions in autophagy: membrane biogenesis and target recognition. Regulation of PE conjugation and deconjugation of Atg8 is crucial for these functions in which Atg4 has a critical function by both processing Atg8 precursors and deconjugating Atg8–PE. Here, we report the crystal structures of catalytically inert human Atg4B (HsAtg4B) in complex with processed and unprocessed forms of LC3, a mammalian orthologue of yeast Atg8. On LC3 binding, the regulatory loop and the N‐terminal tail of HsAtg4B undergo large conformational changes. The regulatory loop masking the entrance of the active site of free HsAtg4B is lifted by LC3 Phe119, so that a groove is formed along which the LC3 tail enters the active site. At the same time, the N‐terminal tail masking the exit of the active site of HsAtg4B in the free form is detached from the enzyme core and a large flat surface is exposed, which might enable the enzyme to access the membrane‐bound LC3–PE.