PDZ domains are the most prominent biological structural domains involved in protein-protein interactions in the human cell. The second PDZ domain of the protein tyrosine phosphatase BL (PDZ2) interacts and binds the C-termini of the tumour suppressor protein APC and of the LIM domain-containing protein RIL. One isoform of PDZ2 (PDZ2as) involves an alternative spliced form that exhibits an insertion of 5 residues in a loop. PDZ2as abrogates binding to its partners, even if the insertion is directly located in its binding pocket. Here, we investigate the folding and function of PDZ2as, in comparison to the previously characterized PDZ2 domain. Data reveal that, whilst the thermodynamic stability of PDZ2as appears as nearly identical to that of PDZ2, the insertion of 5 amino acids induces formation of some weak transient non-native interactions in the folding transition state, as mirrored by a concomitant increase of both the folding and unfolding rate constants. From a functional perspective, we show that the decrease in affinity is caused by a pronounced decrease of the association rate constants (by nearly ten fold), with no effect on the microscopic dissociation rate constants. The results are briefly discussed in the context of previous work on PDZ domains.