Structural maintenance of chromosome (SMC) protein complexes are the key organizers of the spatiotemporal structure of chromosomes. The condensin SMC complex has recently been shown to be a molecular motor that extrudes large loops of DNA, but the mechanism of this unique motor remains elusive. Using atomic force microscopy, we show that budding yeast condensin exhibits mainly open ‘O’ shapes and collapsed ‘B’ shapes, and it cycles dynamically between these two states over time, with ATP binding inducing the O to B transition. Condensin binds DNA via its globular domain and also via the hinge domain. We observe a single condensin complex at the stem of extruded DNA loops, where the neck size of the DNA loop correlates with the width of the condensin complex. The results are indicative of a type of scrunching model in which condensin extrudes DNA by a cyclic switching of its conformation between O and B shapes.