Crystals of the molecular complex between the esterified tripeptide fragment of pepstatin and the aspartyl proteinase penicillopepsin are isomorphous with crystals of native penicillopepsin. The difference electron-density map at 1.8-A resolution, computed by using the amplitude differences and refined phases of reflections from the crystal of native penicillopepsin, unambiguously showed the binding mode of isovaleryl-Val-Val-StaOEt, where StaOEt is the ethyl ester of statine [(4S,3S)-4-amino-3-hydroxyl-6-methylheptanoic acid]. In addition, a major conformational change in penicillopepsin involving the large beta loop of residues from Trp-71 to Gly-83 (the so-called "flap" region) occurs as a result of this inhibitor binding. This structural movement provides the first confirmation of the importance of enzyme flexibility in the aspartyl proteinase mechanism. The 3-hydroxyl group of the Statine residue and the carbonyl oxygen atom of the ethyl ester are situated on either side of the approximate plane containing the hydrogen-bonded carboxyl groups of Asp-33 and Asp-213. The observed binding mode of the pepstatin tripeptide fragment is similar to that predicted for the binding of good substrates with penicillopepsin [James, M. N. G. (1980) Can. J. Biochem. 58, 251-271].