Nicotinic acetylcholine receptors are implicated in several neuropsychiatric disorders, including nicotine addiction, Alzheimer's, schizophrenia, and depression. Therefore, they represent a critical molecular target for drug development and targeted therapeutic intervention. Understanding the molecular mechanisms by which allosteric modulators enhance activation of these receptors is crucial to the development of new drugs. We used the substituted cysteine accessibility method to study conformational changes induced by the positive allosteric modulator N-(5-chloro-2,4-dimethoxyphenyl)-N'-(5-methyl-3-isoxazolyl)-urea (PNU-120596) in the extracellular ligand binding domain of alpha7 nicotinic receptors carrying the L247T mutation. PNU-120596 caused changes in cysteine accessibility at the inner beta sheet, transition zone, and agonist binding site. These changes in accessibility are similar to but not identical to those caused by ACh alone. In particular, PNU-120596 induced changes in MTSEA accessibility at N170C (in the transition zone) that were substantially different from those evoked by acetylcholine (ACh). We found that PNU-120596 induced changes at position E172C in the absence of allosteric modulation. We identified a cysteine mutation of the agonist binding site (W148C) that exhibited an unexpected phenotype in which PNU-120596 acts as a full agonist. In this mutant, ACh-evoked currents were more sensitive to thiol modification than PNU-evoked currents, suggesting that PNU-120596 does not bind at unoccupied agonist-binding sites. Our results provide evidence that binding sites for PNU-120596 are not in the agonist-binding sites and demonstrate that positive allosteric modulators such as PNU-120596 enhance agonist-evoked gating of nicotinic receptors by eliciting conformational effects that are similar but nonidentical to the gating conformations promoted by ACh.