The roles of extracellular residues of G-protein-coupled receptors (GPCRs) are not well defined compared with residues in transmembrane helices. Nevertheless, it has been established that extracellular domains of both peptide-GPCRs and amine-GPCRs incorporate functionally important residues. Extracellular loop 2 (ECL2) has attracted particular interest, because the x-ray structure of bovine rhodopsin revealed that ECL2 projects into the binding crevice within the transmembrane bundle. Our study provides the first comprehensive investigation into the role of the individual residues comprising the entire ECL2 domain of a small peptide-GPCR. Using the V(1a) vasopressin receptor, systematic substitution of all of the ECL2 residues by Ala generated 30 mutant receptors that were characterized pharmacologically. The majority of these mutant receptor constructs (24 in total) had essentially wild-type ligand binding and intracellular signaling characteristics, indicating that these residues are not critical for normal receptor function. However, four aromatic residues Phe(189), Trp(206), Phe(209), and Tyr(218) are important for agonist binding and receptor activation and are highly conserved throughout the neurohypophysial hormone subfamily of peptide-GPCRs. Located in the middle of ECL2, juxtaposed to the highly conserved disulfide bond, Trp(206) and Phe(209) project into the binding crevice. Indeed, Phe(209) is part of the Cys-X-X-X-Ar (where Ar is an aromatic residue) motif, which is well conserved in both peptide-GPCRs and amine-GPCRs. In contrast, Phe(189) and Tyr(218), located at the extreme ends of ECL2, may be important for determining the position of the ECL2 cap over the binding crevice. This study provides mechanistic insight into the roles of highly conserved ECL2 residues.