ELIC, the pentameric ligand-gated ion channel from Erwinia chrysanthemi, is a prototype for Cys-loop receptors. Here we show that acetylcholine is a competitive antagonist for ELIC. We determine the acetylcholine-ELIC cocrystal structure to a 2.9-angstrom resolution and find that acetylcholine binding to an aromatic cage at the subunit interface induces a significant contraction of loop C and other structural rearrangements in the extracellular domain. The side chain of the pore-lining residue F247 reorients and the pore size consequently enlarges, but the channel remains closed. We attribute the inability of acetylcholine to activate ELIC primarily to weak cation-pi and electrostatic interactions in the pocket, because an acetylcholine derivative with a simple quaternary-to-tertiary ammonium substitution activates the channel. This study presents a compelling case for understanding the structural underpinning of the functional relationship between agonism and competitive antagonism in the Cys-loop receptors, providing a new framework for developing novel therapeutic drugs.