To clarify the involvement of specific domains of muscarinic receptors in the action of allosteric modulators, muscarinic M(3) receptors (on which allosteric interactions are weak) were genetically modified to become more similar to M(2) receptors (on which allosteric interactions are strong) and were expressed in COS-7 cells. Affinity for allosteric modulator gallamine was enhanced 25- to 50-fold by modifications of the third external loop (o3) and the negative effect of gallamine on the affinity for classical antagonist N-[(3)H]methylscopolamine ([(3)H]NMS) was augmented. Affinity for alcuronium became 3-fold higher after the o3 loop of M(3) receptors was made identical with the o3 loop of M(2) receptors, and alcuronium acquired positive influence on the affinity for [(3)H]NMS. This is the first instance of inducing positive cooperativity on muscarinic receptors by genetic manipulation. Transferring whole o2 loop from M(2) to M(3) receptors substantially enhanced affinities for gallamine and alcuronium without augmenting their negative action on [(3)H]NMS binding. In contrast, effects of simply adding two negative charges into the o2 loop of M(3) receptors were small. Removal of Arg from o1 loop abolished the negative effect of gallamine but not of alcuronium on [(3)H]NMS binding at equilibrium. Data point to an important role of o3 loop in the mechanism of the positive and negative cooperativity between [(3)H]NMS and alcuronium and gallamine, respectively, and in the binding of both modulators to M(2) receptors and reveal independence between mutation-induced changes in the affinity for a modulator and in the magnitude and direction of the allosteric effect of the modulator.