The AMP-activated protein kinase (AMPK), a central enzyme in the regulation of energy homeostasis, is an important drug target for type 2 diabetes, obesity, and cancer. Binding of adenosine nucleotides to the regulatory gamma-subunit tightly regulates the activity of this enzyme. Though recent crystal structures of AMPK have provided important insights into the allosteric activation of AMPK, molecular details of the regulatory mechanism of AMPK activation is still elusive. Here, we have performed extensive all-atom molecular dynamics (MD) simulations and shown that the kinase domain (KD) and gamma-subunit come closer resulting in a more compact heterotrimeric AMPK complex in AMP-bound state compared to the ATP-bound state. The binding of ATP at site 3 of regulatory gamma-subunit allosterically inhibits AMPK by destabilizing different regulatory regions of alpha-subunit: the autoinhibitory domain, the linker region, and the activation loop of the kinase core. The catalytically important residues experience a change in mechanical stress, and major rearrangements in community structure derived from residue-residue interaction energy-based network are observed in KD and alpha-linker region upon binding of different nucleotides. Our results also highlight the role of conserved charged residues forming an ionic network near the site 3 of gamma-subunit in allosteric communications.