Penicillium marneffei is a dimorphic, pathogenic fungus in Southeast Asia that mostly afflicts immunocompromised individuals. As the only dimorphic member of the genus, it goes through a phase transition from a mold to yeast form, which is believed to be a requisite for its pathogenicity. Mp1p, a cell wall antigenic mannoprotein existing widely in yeast, hyphae, and conidia of the fungus, plays a vital role in host immune response during infection. To understand the function of Mp1p, we have determined the x-ray crystal structure of its ligand binding domain 2 (LBD2) to 1.3 A. The structure reveals a dimer between the two molecules. The dimer interface forms a ligand binding cavity, in which electron density was observed for a palmitic acid molecule interacting with LBD2 indirectly through hydrogen bonding networks via two structural water molecules. Isothermal titration calorimetry experiments measured the ligand binding affinity (K(d)) of Mp1p at the micromolar level. Mutations of ligand-binding residues, namely S313A and S332A, resulted in a 9-fold suppression of ligand binding affinity. Analytical ultracentrifugation assays demonstrated that both LBD2 and Mp1p are mostly monomeric in vitro, no matter with or without ligand, and our dimeric crystal structure of LBD2 might be the result of crystal packing. Based on the conformation of the ligand-binding pocket in the dimer structure, a model for the closed, monomeric form of LBD2 is proposed. Further structural analysis indicated the biological importance of fatty acid binding of Mp1p for the survival and pathogenicity of the conditional pathogen.