Transduction of biological signals at the molecular level involves the activation and/or inhibition of allosteric proteins. In the transcription factor cAMP receptor protein (CRP) from Escherichia coli, the allosteric activation, or apo-holo transition, involves rigid body motions of domains and structural rearrangements within the hinge region connecting the cAMP- and DNA-binding domains. During this apo-holo transition, residue 138 is converted as part of the elongated D-helix to the position of the N-terminal capping residue of a shorter D-helix. The goal of the current study is to elucidate the role of residue 138 in modulating the allostery between cAMP and DNA binding. By systematically mutating residue 138, we found that mutants with higher N-terminal capping propensities lead to increased cooperativity of cAMP binding and a concomitant increase in affinity for lac-DNA. Furthermore, mutants with higher N-terminal capping propensity correlate with properties characteristic of holo-CRP, particularly, increase in protein structural dynamics. Overall, our results provide a quantitative characterization of the role of residue 138 in the isomerization equilibrium between the apo and holo forms of CRP, and in turn the thermodynamic underpin to the molecular model of allostery revealed by the high resolution structural studies.