The crystal structure of E. coli maltodextrin phosphorylase co-crystallized with an oligosaccharide has been solved at 3.0 A resolution, providing the first structure of an oligosaccharide bound at the catalytic site of an alpha-glucan phosphorylase. An induced fit mechanism brings together two domains across the catalytic site tunnel. A stacking interaction between the glucosyl residue and the aromatic group of a tyrosine residue at a sub-site remote (8 A) from the catalytic site provides a key element in substrate recognition; mutation of this residue to Ala decreases the Kcat/Km by 10(4). Extrapolation of the results to substrate binding across the site of attack by phosphorolysis indicates a likely alteration in the glycosidic torsion angles from their preferred values, an alteration that appears to be important for the catalytic mechanism.