We have mutated several amino acids in the region of the GABA(A) receptor alpha1 subunit predicted to form a small extracellular loop between transmembrane domains two and three to investigate its possible role in ligand sensitivity. The mutations were S275T, L276A, P277A, V279A, A280S and Y281F. Mutant alpha1 subunits were co-expressed with beta2 and gamma2 subunits in tsA201 cells or Xenopus oocytes. Binding studies revealed that the only mutation that significantly affected [3H]Ro15-4513 binding was the V279A substitution which reduced the affinity for this ligand. Electrophysiological examination of mutant receptors revealed that L276A, P277A and V279A displayed rightward shifts of their GABA concentration-response curves, the largest occurring with the L276A mutant. The impact of these mutations on allosteric modulation by benzodiazepine-site ligands was examined. V279A reduced the potency of both flunitrazepam and Ro15-4513 but, in each case, their efficacy was enhanced. A280S resulted in a decrease in flunitrazepam efficacy without affecting its potency. Additionally, P277A and A280S resulted in Ro15-4513 losing its inverse agonist effect at these receptors. These results suggest that a domain within this small extracellular loop between TMII-TMIII plays a role in determining the sensitivity of GABA(A) receptors to both GABA and benzodiazepine-site ligands.