The influenza A virus M2 proton channel equilibrates pH across the viral membrane during entry and across the trans-Golgi membrane of infected cells during viral maturation. It is an important target of adamantane-family antiviral drugs, but drug resistance has become a critical problem. Two different sites for drug interaction have been proposed. One is a lipid-facing pocket between 2 adjacent transmembrane helices (around Asp-44), at which the drug binds and inhibits proton conductance allosterically. The other is inside the pore (around Ser-31), at which the drug directly blocks proton passage. Here, we describe structural and functional experiments on the mechanism of drug inhibition and resistance. The solution structure of the S31N drug-resistant mutant of M2, a mutant of the highly pathogenic avian influenza subtype H5N1, shows that replacing Ser-31 with Asn has little effect on the structure of the channel pore, but dramatically reduces drug binding to the allosteric site. Mutagenesis and liposomal proton flux assays show that replacing the key residue (Asp-44) in the lipid-facing binding pocket with Ala has a dramatic effect on drug sensitivity, but that the channel remains fully drug sensitive when replacing Ser-31 with Ala. Chemical cross-linking studies indicate an inverse correlation between channel stability and drug resistance. The lipid-facing pocket contains residues from 2 adjacent channel-forming helices. Therefore, it is present only when the helices are tightly packed in the closed conformation. Thus, drug-resistant mutants impair drug binding by destabilizing helix-helix assembly.