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The gaseous hormone ethylene is perceived in plants by membrane-bound receptors, the best studied of these being ETR1 from Arabidopsis. Ethylene receptors can mediate a response to ethylene concentrations at less than one part per billion; however, the mechanistic basis for such high-affinity ligand binding has remained elusive. Here we identify an Asp residue within the ETR1 transmembrane domain that plays a critical role in ethylene binding. Site-directed mutation of the Asp to Asn results in a functional receptor that has a reduced affinity for ethylene, but still mediates ethylene responses in planta. The Asp residue is highly conserved among ethylene receptor-like proteins in plants and bacteria, but Asn variants exist, pointing to the physiological relevance of modulating ethylene-binding kinetics. Our results also support a bifunctional role for the Asp residue in forming a polar bridge to a conserved Lys residue in the receptor to mediate changes in signaling output. We propose a new structural model for the mechanism of ethylene binding and signal transduction, one with similarities to that found in a mammalian olfactory receptor.