The 14-3-3 family of proteins includes seven isotypes in mammalian cells that play numerous diverse roles in intracellular signaling. Most 14-3-3 proteins form homodimers and mixed heterodimers between different isotypes, with overlapping roles in ligand binding. In contrast, one mammalian isoform, 14-3-3sigma, expressed primarily in epithelial cells, appears to play a unique role in the cellular response to DNA damage and in human oncogenesis. The biological and structural basis for these 14-3-3sigma-specific functions is unknown. We demonstrate that endogenous 14-3-3sigma preferentially forms homodimers in cells. We have solved the x-ray crystal structure of 14-3-3sigma bound to an optimal phosphopeptide ligand at 2.4 angstroms resolution. The structure reveals the presence of stabilizing ring-ring and salt bridge interactions unique to the 14-3-3sigma homodimer structure and potentially destabilizing electrostatic interactions between subunits in 14-3-3sigma-containing heterodimers, rationalizing preferential homodimerization of 14-3-3sigma in vivo. The interaction of the phosphopeptide with 14-3-3 reveals a conserved mechanism for phospho-dependent ligand binding, implying that the phosphopeptide binding cleft is not the critical determinant of the unique biological properties of 14-3-3sigma. Instead, the structure suggests a second ligand binding site involved in 14-3-3sigma-specific ligand discrimination. We have confirmed this by site-directed mutagenesis of three sigma-specific residues that uniquely define this site. Mutation of these residues to the alternative sequence that is absolutely conserved in all other 14-3-3 isotypes confers upon 14-3-3sigma the ability to bind to Cdc25C, a ligand that is known to bind to other 14-3-3 proteins but not to sigma.