Allosteric ligands that modulate how G protein-coupled receptors respond to traditional orthosteric drugs are an exciting and rapidly expanding field of pharmacology. An allosteric ligand for the cannabinoid receptor CB1, Org 27569, exhibits an intriguing effect; it increases agonist binding, yet blocks agonist-induced CB1 signaling. Here we explored the mechanism behind this behavior, using a site-directed fluorescence labeling approach. Our results show that Org 27569 blocks conformational changes in CB1 that accompany G protein binding and/or activation, and thus inhibit formation of a fully active CB1 structure. The underlying mechanism behind this behavior is that simultaneous binding of Org 27569 produces a unique agonist-bound conformation, one that may resemble an intermediate structure formed on the pathway to full receptor activation.