Peptide ligands of class B G-protein-coupled receptors act via a two-step binding process, but the essential mechanisms that link their extracellular binding to intracellular receptor-arrestin interactions are not fully understood. Using NMR, crosslinking coupled to mass spectrometry, signaling experiments and computational approaches on the parathyroid hormone (PTH) type 1 receptor (PTHR), we show that initial binding of the PTH C-terminal part constrains the conformation of the flexible PTH N-terminal signaling epitope before a second binding event occurs. A 'hot-spot' PTH residue, His9, that inserts into the PTHR transmembrane domain at this second step allosterically engages receptor-arrestin coupling. A conformational change in PTHR intracellular loop 3 permits favorable interactions with β-arrestin's finger loop. These results unveil structural determinants for PTHR-arrestin complex formation and reveal that the two-step binding mechanism proceeds via cooperative fluctuations between ligand and receptor, which extend to other class B G-protein-coupled receptors.