Allosteric modulation is a mechanism for modifying pharmacological receptor activity that has largely been ignored in terms of therapeutic drug design, although benzodiazepine receptor ligands are an example of the serendipitous discovery of this class of compound. The current mathematical models of allosteric interactions at (particularly G-protein-coupled) receptors concentrate on the effects of the allosteric ligand on orthosteric ligand binding and ignore potential effects of these compounds on the ability of orthosteric ligands to cause receptor activation. In this report a mathematical model of allosteric interactions at pharmacological receptors has been investigated that explicitly includes effects of the allosteric ligand on receptor activation. This model uses the two-state model of receptor activation as its basis and is qualitatively consistent with currently reported behavior of allosteric modulators. The predictions of this model suggest a series of criteria that should be tested before the effects of an allosteric modulator can be quantified in a nonsystem-dependent manner. It has also been used to provide a potential mechanistic explanation for the functional effects of the A(1) adenosine receptor allosteric enhancer PD 81,723 and a recently reported allosteric modulator of type 1 metabotropic glutamate receptors.