Extracellular ATP-gated P2X receptors are trimeric non-selective cation channels important for many physiological events including immune response and neural transmission. These receptors belong to a unique class of ligand-gated ion channels composed of only six transmembrane helices and a relatively small extracellular domain that harbors three ATP-binding pockets. The crystal structures of P2X receptors, including the recent P2X3 structures representing three different stages of the gating cycle, have provided a compelling structural foundation for understanding how this class of ligand-gated ion channels function. These structures, in combination with numerous functional studies ranging from classic mutagenesis and electrophysiology to modern optogenetic pharmacology, have uncovered unique molecular mechanisms of P2X receptor function. This review article summarizes the current knowledge in P2X receptor activation, especially focusing on the mechanisms underlying ATP-binding, conformational changes in the extracellular domain, and channel gating and desensitization.