Raf kinase inhibitory protein (RKIP/PEBP1), a member of the phosphatidylethanolamine binding protein family that possesses a conserved ligand-binding pocket, negatively regulates the mammalian mitogen-activated protein kinase (MAPK) signaling cascade. Mutation of a conserved site (P74L) within the pocket leads to a loss or switch in the function of yeast or plant RKIP homologues. However, the mechanism by which the pocket influences RKIP function is unknown. Here we show that the pocket integrates two regulatory signals, phosphorylation and ligand binding, to control RKIP inhibition of Raf-1. RKIP association with Raf-1 is prevented by RKIP phosphorylation at S153. The P74L mutation increases kinase interaction and RKIP phosphorylation, enhancing Raf-1/MAPK signaling. Conversely, ligand binding to the RKIP pocket inhibits kinase interaction and RKIP phosphorylation by a noncompetitive mechanism. Additionally, ligand binding blocks RKIP association with Raf-1. Nuclear magnetic resonance studies reveal that the pocket is highly dynamic, rationalizing its capacity to interact with distinct partners and be involved in allosteric regulation. Our results show that RKIP uses a flexible pocket to integrate ligand binding- and phosphorylation-dependent interactions and to modulate the MAPK signaling pathway. This mechanism is an example of an emerging theme involving the regulation of signaling proteins and their interaction with effectors at the level of protein dynamics.