The kinesin-3 KIF1C is a fast organelle transporter implicated in the transport of dense core vesicles in neurons and the delivery of integrins to cell adhesions. Here we report the mechanisms of autoinhibition and release that control the activity of KIF1C. We show that the microtubule binding surface of KIF1C motor domain interacts with its stalk and that these autoinhibitory interactions are released upon binding of protein tyrosine phosphatase PTPN21. The FERM domain of PTPN21 stimulates dense core vesicle transport in primary hippocampal neurons and rescues integrin trafficking in KIF1C-depleted cells. In vitro, human full-length KIF1C is a processive, plus-end directed motor. Its landing rate onto microtubules increases in the presence of either PTPN21 FERM domain or the cargo adapter Hook3 that binds the same region of KIF1C tail. This autoinhibition release mechanism allows cargo-activated transport and might enable motors to participate in bidirectional cargo transport without undertaking a tug-of-war.