The neurokinin-1 receptor binds neurokinin peptides with the potency order of substance P > substance K > neurokinin B. Elucidating the molecular basis of differential peptide selectivity will require the localization of the binding domain on the receptor. In the present report, mutagenesis and heterologous expression experiments reveal that a segment of the extracellular N-terminal sequence of the neurokinin-1 receptor is required for the high-affinity binding of substance P and related peptide agonists. Substitution of amino acid residues in the N-terminal region of the receptor affects the binding affinity of both intact peptides and a C-terminal substance P "analog", but not of a nonpeptide antagonist. Glycosylation of the receptor does not change the peptide binding affinity. In addition, substitution of the valine-97 residue in the rat neurokinin-1 receptor by a glutamate residue increases the binding affinity of neurokinin B but not substance P or substance K, suggesting that the second extracellular segment is involved in peptide selectivity. These results indicate that the extracellular domains of neurokinin-1 receptor play a critical role in peptide binding.