The thermophilic intracellular protease (PH1704) from Pyrococcus horikoshii that functions as an oligomer (hexamer or higher forms) has proteolytic activity and remarkable stability. PH1704 is classified as a member of the C56 family of peptidases. This study is the first to observe that the use of Cl- as an allosteric inhibitor causes appreciable changes in the catalytic activity of the protease. Theoretical methods were used for further study. Quantum mechanical calculations indicated the binding mode of Cl- with Arg113. A molecular dynamics simulation explained how Cl- stabilized distinct contact species and how it controls the enzyme activity. The new structural insights obtained from this study are expected to stimulate further biochemical studies on the structures and mechanisms of allosteric proteases. It is clear that the discovery of new allosteric sites of the C56 family of peptidases may generate opportunities for pharmaceutical development and increases our understanding of the basic biological processes of this peptidase family.