The adipocyte lipid binding protein (ALBP) is a member of a multigene family of low molecular weight proteins which stoichiometrically and saturably bind hydrophobic ligands and presumably facilitate intracellular lipid metabolism. To probe the structure-function relationship of the binding domain of ALBP, chemical modification has been employed. Modification of the two cysteinyl residues of ALBP (Cys1 and Cys117) with a variety of sulfhydryl reagents decreased the apparent affinity for oleic acid in the following order of effectiveness: methyl methanethiosulfonate <<< p-(chloromercuri)benzenesulfonic acid < N-ethylmaleimide (NEM) = 5,5′-dithiobis(2-nitrobenzoic acid) (DTNB). Thiol titration of ALBP with DTNB in the presence of bound oleate resulted in the modification of a single cysteinyl residue. The oleate-protected cysteine was identified as Cys117 by modification with a combination of reversible (DTNB) and irreversible (NEM) sulfhydryl reagents in the presence or absence of saturating oleic acid. Cys117-NEM ALBP exhibited a large decrease in binding affinity while Cys1-NEM ALBP exhibited normal binding properties. Neither the modification of ALBP with NEM nor the addition of oleic acid had a significant effect on protein structure, as judged by circular dichroic analysis. These results suggest that Cys117 of ALBP resides in the ligand binding domain and that site-specific modification can be utilized to assess the conformational flexibility of the binding cavity.