The divalent cation Zn2+ is a potent potentiator at the strychnine-sensitive glycine receptor (GlyR). This occurs at nanomolar concentrations, which are the predicted endogenous levels of extracellular neuronal Zn2+. Using structural modeling and functional mutagenesis, we have identified the molecular basis for the elusive Zn2+ potentiation site on GlyRs and account for the differential sensitivity of GlyR alpha(1) and GlyR alpha(2) to Zn2+ potentiation. In addition, juxtaposed to this Zn2+ site, which is located externally on the N-terminal domain of the alpha subunit, another residue was identified in the nearby Cys loop, a region that is critical for receptor gating in all Cys loop ligand-gated ion channels. This residue acted as a key control element in the allosteric transduction pathway for Zn2+ potentiation, enabling either potentiation or overt inhibition of receptor activation depending upon the moiety resident at this location. Overall, we propose that Zn2+ binds to a site on the extracellular outer face of the GlyR alpha subunit and exerts its positive allosteric effect via an interaction with the Cys loop to increase the efficacy of glycine receptor gating.