Allosteric modulators are highly desirable as drugs, particularly for G-protein-coupled receptor (GPCR) targets, because allosteric drugs can achieve selectivity between closely related receptors. The mechanisms by which allosteric modulators achieve selectivity remain elusive, however, particularly given recent structures that reveal similar allosteric binding sites across receptors. Here we show that positive allosteric modulators (PAMs) of the M1 muscarinic acetylcholine receptor (mAChR) achieve exquisite selectivity by occupying a dynamic pocket absent in existing crystal structures. This cryptic pocket forms far more frequently in molecular dynamics simulations of the M1 mAChR than in those of other mAChRs. These observations reconcile mutagenesis data that previously appeared contradictory. Further mutagenesis experiments validate our prediction that preventing cryptic pocket opening decreases the affinity of M1-selective PAMs. Our findings suggest opportunities for the design of subtype-specific drugs exploiting cryptic pockets that open in certain receptors but not in other receptors with nearly identical static structures.