Structure-function relationships in proteins are predicated on the spatial proximity of noncovalently interacting groups of atoms. Thus, structural elements located away from a protein's active site are typically presumed to serve a stabilizing or scaffolding role for the larger structure. Here we report a functional role for a distal structural element in a PDZ domain, even though it is not required to maintain PDZ structure. The third PDZ domain from PSD-95/SAP90 (PDZ3) has an unusual additional third alpha helix (alpha3) that packs in contiguous fashion against the globular domain. Although alpha3 lies outside the active site and does not make direct contact with C-terminal peptide ligand, removal of alpha3 reduces ligand affinity by 21-fold. Further investigation revealed that the difference in binding free energies between the full-length and truncated constructs is predominantly entropic in nature and that without alpha3, picosecond-nanosecond side-chain dynamics are enhanced throughout the domain, as determined by (2)H methyl NMR relaxation. Thus, the distal modulation of binding function appears to occur via a delocalized conformational entropy mechanism. Without removal of alpha3 and characterization of side-chain dynamics, this dynamic allostery would have gone unnoticed. Moreover, what appeared at first to be an artificial modification of PDZ3 has been corroborated by experimentally verified phosphorylation of alpha3, revealing a tangible biological mechanism for this novel regulatory scheme. This hidden dynamic allostery raises the possibility of as-yet unidentified or untapped allosteric regulation in this PDZ domain and is a very clear example of function arising from dynamics rather than from structure.