The second extracellular (E2) loop of G protein-coupled receptors (GPCRs) plays an essential but poorly understood role in the binding of non-peptidic small molecules. We have utilized both orthosteric ligands and allosteric modulators of the M2 muscarinic acetylcholine receptor, a prototypical Family A GPCR, to probe possible E2 loop binding dynamics. We developed a homology model based on the crystal structure of bovine rhodopsin and predicted novel cysteine substitutions that should dramatically reduce E2 loop flexibility via disulfide bond formation and significantly inhibit the binding of both types of ligands. This prediction was validated experimentally using radioligand binding, dissociation kinetics, and cell-based functional assays. The results argue for a flexible "gatekeeper" role of the E2 loop in the binding of both allosteric and orthosteric GPCR ligands.