Understanding the basis of communication within protein domains is a major challenge in structural biology. We present structural and dynamical evidence for allosteric effects in a PDZ domain, PDZ2 from the tyrosine phosphatase PTP-BL, upon binding to a target peptide. The NMR structures of its free and peptide-bound states differ in the orientation of helix alpha 2 with respect to the remainder of the molecule, concomitant with a readjustment of the hydrophobic core. Using an ultrafast mixing instrument, we detected a deviation from simple bimolecular kinetics for the association with peptide that is consistent with a rate-limiting conformational change in the protein (k(obs) similar to 7 x 10(3) s(-1)) and an induced-fit model. Furthermore, the binding kinetics of 15 mutants revealed that binding is regulated by long-range interactions, which can be correlated with the structural rearrangements resulting from peptide binding. The homologous protein PSD-95 PDZ3 did not display a similar ligand-induced conformational change.