Type I interferons (IFN-I) are key innate immune effectors predominantly produced by activated plasmacytoid dendritic cells (pDCs). By modulating immune responses at their foundation, IFNs can widely reshape immunity to control infectious diseases and malignancies. Nevertheless, their biological activities can also be detrimental to surrounding healthy cells, as prolonged IFN-I signaling is associated with excessive inflammation and immune dysfunction. The interaction of the human pDC receptor immunoglobulin-like transcript 7 (ILT7) with its IFN-I-regulated ligand, bone marrow stromal cell antigen 2 (BST2) plays a key role in controlling the IFN-I amounts produced by pDCs in response to Toll-like receptor (TLR) activation. However, the structural determinants and molecular features of BST2 that govern ILT7 engagement and activation are largely undefined. Using two functional assays to measure BST2-stimulated ILT7 activation as well as biophysical studies, here we identified two structurally-distinct regions of the BST2 ectodomain that play divergent roles during ILT7 activation. We found that whereas the coiled-coil region contains a newly defined ILT7-binding surface, the N-terminal region appears to suppress ILT7 activation. We further show that a stable BST2 homodimer binds to ILT7, but post-binding events associated with the unique BST2 coiled-coil plasticity are required to trigger receptor signaling. Hence, BST2 with an unstable or a rigid coiled-coil fails to activate ILT7, whereas substitutions in its N-terminal region enhance activation. Importantly, the biological relevance of these newly defined domains of BST2 is underscored by the identification of substitutions having opposing potentials to activate ILT7 in pathological malignant conditions.