3-Azioctanol is a photoactivatable analogue of octanol that noncompetitively inhibits nicotinic acetylcholine receptors (nAChRs). Photolabeling studies using [3H]-3-azioctanol in Torpedo nAChR identified alphaE262 as a site of desensitization-dependent incorporation. However, it is unknown whether photolabeling of alphaE262 causes functional effects in nAChRs and what other roles this residue plays in gating, desensitization, and channel block. We used ultrafast patch-perfusion electrophysiology and ultraviolet (UV) irradiation to investigate the state-dependence of both reversible nAChR inhibition by 3-azioctanol and the irreversible effects of photoactivated 3-azioctanol. Channels with mutations at alphaE262 were studied to determine ACh EC50s, desensitization rates, and sensitivities to reversible and photoirreversible 3-azioctanol inhibition. Exposure to 3-azioctanol in the presence of 365 nm UV light produced irreversible inhibition of wild-type nAChRs. Desensitization with ACh dramatically increased the degree of irreversible inhibition by photoactivated 3-azioctanol. Mutations at alphaE262 that reduce diazirine photomodification decreased the irreversible inhibition induced by photoactivated 3-azioctanol. Hydrophobic mutations at alphaE262 significantly slowed rapid ACh-induced desensitization and dramatically slowed fast resensitization. In contrast, alphaE262 mutations minimally affected 3-azioctanol channel block, and a half blocking concentration of 3-azioctanol did not alter the rate of ACh-induced fast desensitization. Our results indicate that position alphaE262 on muscle nAChRs contributes to an allosteric modulator site that is strongly coupled to desensitization. Occupation of this pocket by hydrophobic molecules stabilizes a desensitized state by slowing resensitization.