To examine the biochemical mechanism by which hsp90 exerts its essential positive function on certain signal transduction proteins, we characterized the effects of molybdate and geldanamycin on hsp90 function and structure. Molybdate inhibited hsp90-mediated p56lck biogenesis and luciferase renaturation while enforcing salt-stable interactions with these substrates. Molybdate also reduced the amount of free hsp90 present in cell lysates, inhibited hsp90's ability to bind geldanamycin, and induced resistance to proteolysis at a specific region within the C-terminal domain of hsp90. In contrast, the hsp90 inhibitor geldanamycin prevented hsp90 from assuming natural or molybdate-induced conformations that allow salt-stable interactions with substrates. When these compounds were applied sequentially, the order of addition determined the effects observed, indicating that these agents had opposing effects on hsp90. We conclude that a specific region within the C-terminal domain of hsp90 (near residue 600) determines the mode by which hsp90 interacts with substrates and that the ability of hsp90 to cycle between alternative modes of interaction is obligatory for hsp90 function.