Activation of erythropoietin (EPO) receptor (EPOR) by a small peptide (ERP) was reported previously. ERP binds to a different receptor site than EPO, and binding of ERP does not change the dissociation constant and maximal binding for EPO binding to the receptor. The extracellular binding site for ERP is now characterized. The site is located in the membrane proximal, extracellular part of the receptor. ERP binds to a region on the EPOR that contains the same sequence as ERP. It is speculated that ERP binds to its identical sequence on EPOR, as ERP self-interacts. ERP is specific for EPOR and associates noncovalently with EPOR in a ratio 1:1. Peptide binding to the receptor results in receptor-mediated cellular proliferation, intracellular signaling, and erythroid colony-forming unit formation in bone marrow cells. The activity is comparable to that of EPO. Recognition of such receptor sites represents a new and important concept in receptor function.