We used molecular dynamics (MD) simulations and protein docking to elucidate the mechanism of allosteric inhibition of the human form of peroxiredoxin (Prx), 2-Cys proliferation associated gene (PAG). Beginning by using the rat form of Prx, 2-Cys heme-binding protein as a template, we used homology modeling to find the structure of human 2-Cys PAG, which is in dimeric form. Molecular dynamics simulations showed that the structure of the reduced form of the 2-Cys PAG dimer fluctuates as the two monomers drift away and approach each other. We then used SiteMap to search for binding sites on the surface of this dimer. A binding site between the two monomers was found, and virtual screening with docking was performed to identify a ligand binding to this site. Subsequent MD simulation revealed that with this ligand in the binding site, the dimer structure of 2-Cys PAG becomes stabilized such that two cysteine residues from two monomers, which are partners of a disulfide bond of the oxidized form, remain separated. This mechanism can be used as an allosteric inhibition of Prx as a hydrogen peroxide reducer, the role of which has been studied as an anticancer drug target.