You will need to edit /etc/ssh/sshd_config as follows:
# Both of these are probably already there, but commented
PubkeyAuthentication yes
# The next line makes sure that sshd will look in
# $HOME/.ssh/authorized_keys for public keys
AuthorizedKeysFile %h/.ssh/authorized_keys
Additionally, if you want to disable password authentication alltogether (which is usually a good idea, if you use keypairs), add the following:
# Again, this rule is already there, but usually defaults to 'yes'
PasswordAuthentication no
After that, restart ssh by issueing /etc/init.d/sshd restart and you should be fine!
The above assumes you have already properly created the .ssh dir with the proper permissions.
This means you set chmod 0700 to ~/.ssh.