Based on the Torpedo acetylcholine receptor structure, Unwin and colleagues (Miyazawa et al., 2003; Unwin, 2005) hypothesized that the transduction of agonist binding to channel gate opening involves a "pin-into-socket" interaction between alphaV46 at the tip of the extracellular beta1-beta2 loop and the transmembrane M2 segment and M2-M3 loop. We mutated to cysteine the aligned positions in the 5-HT3A and 5-HT3B subunit beta1-beta2 loops K81 and Q70, respectively. The maximal 5-HT-activated currents in receptors containing 5-HT3A/K81C or 5-HT3B/Q70C were markedly reduced compared with wild type. Desensitization of wild-type currents involved fast and slow components. Mutant currents desensitized with only the fast time constant. Reaction with several methanethiosulfonate reagents potentiated currents to wild-type levels, but reaction with other more rigid thiol-reactive reagents caused inhibition. Single-channel conductances of wild type, K81C, and K81C after modification were similar. We tested the proximity of K81C to the M2-M3 loop by mutating M2-M3 loop residues to cysteine in the K81C background. Disulfide bonds formed in 5-HT3A/K81C/A304C and 5-HT3A/K81C/I305C when coexpressed with 5-HT3B. We conclude that in the resting state, K81 is not in a hydrophobic pocket as suggested by the pin-into-socket hypothesis. K81 interacts with the extracellular end of M2 and plays a critical role in channel opening and in the return from fast desensitization. We suggest that during channel activation, beta1-beta2 loop movement moves M2 and the M2-M3 loop so that the M2 segments rotate/translate away from the channel axis, thereby opening the lumen. Recovery from fast desensitization requires the interaction between K81 and the extracellular end of M2.