A major challenge of CRISPR/Cas9-mediated genome engineering is that not all guide RNAs (gRNAs) cleave the DNA efficiently. Although the heterogeneity of gRNA activity is well recognized, the current understanding of how CRISPR/Cas9 activity is regulated remains incomplete. Here, we identify a sweet spot range of binding free energy change for optimal efficiency which largely explains why gRNAs display changes in efficiency at on- and off-target sites, including why gRNAs can cleave an off-target with higher efficiency than the on-target. Using an energy-based model, we show that local gRNA-DNA interactions resulting from Cas9 "sliding" on overlapping protospacer adjacent motifs (PAMs) profoundly impact gRNA activities. Combining the effects of local sliding for a given PAM context with global off-targets allows us to better identify highly specific, and thus efficient, gRNAs. We validate the effects of local sliding on gRNA efficiency using both public data and in-house data generated by measuring SpCas9 cleavage efficiency at 1024 sites designed to cover all possible combinations of 4-nt PAM and context sequences of 4 gRNAs. Our results provide insights into the mechanisms of Cas9-PAM compatibility and cleavage activation, underlining the importance of accounting for local sliding in gRNA design.