The N-methyl-D-aspartate (NMDA) subtype of ionotropic glutamate receptors is a heterooligomeric membrane protein composed of homologous subunits. Here, the contribution of the M3-M4 loop of the NR1 subunit to the binding of glutamate and the co-agonist glycine was investigated by site-directed mutagenesis. Substitution of the phenylalanine residues at positions 735 or 736 of the M3-M4 loop produced a 15- to 30-fold reduction in apparent glycine affinity without affecting the binding of glutamate and the competitive glycine antagonist 7-chlorokynurenic acid; mutation of both residues caused a >100-fold decrease in glycine affinity. These residues are found in a C-terminal region of the M3-M4 loop that shows significant sequence similarity to bacterial amino acid-binding proteins. Epitope tagging revealed both the N-terminus and the M3-M4 loop to be exposed extracellularly, whereas a C-terminal epitope was localized intracellularly. These results indicate that the M3-M4 loop is part of the ligand-binding pocket of the NR1 subunit and provide the basis for a refined model of the glycine-binding site of the NMDA receptor.