Hemoglobin (Hb) synthesis is coordinated by homeostatic mechanisms to limit the accumulation of free alpha or beta subunits, which are cytotoxic. Alpha hemoglobin-stabilizing protein (AHSP) is an abundant erythroid protein that specifically binds free alphaHb, stabilizes its structure, and limits its ability to participate in chemical reactions that generate reactive oxygen species. Gene ablation studies in mice demonstrate that AHSP is required for normal erythropoiesis. AHSP-null erythrocytes are short-lived, contain Hb precipitates, and exhibit signs of oxidative damage. Loss of AHSP exacerbates beta-thalassemia in mice, indicating that altered AHSP expression or function could modify thalassemia phenotypes in humans, a topic that is beginning to be explored in clinical studies. We used biochemical, spectroscopic, and crystallographic methods to examine how AHSP stabilizes alphaHb. AHSP binds the G and H helices of alphaHb on a surface that largely overlaps with the alpha1-beta1 interface of HbA. This result explains previous findings that betaHb can competitively displace AHSP from alphaHb to form HbA tetramer. Remarkably, binding of AHSP to oxygenated alphaHb induces dramatic conformational changes and converts the heme-bound iron to an oxidized hemichrome state in which all six coordinate positions are occupied. This structure limits the reactivity of heme iron, providing a mechanism by which AHSP stabilizes alphaHb. These findings suggest a biochemical pathway through which AHSP might participate in normal Hb synthesis and modulate the severity of thalassemias. Moreover, understanding how AHSP stabilizes alphaHb provides a theoretical basis for new strategies to inhibit the damaging effects of free alphaHb that accumulates in beta-thalassemia.