Studies on the activation of ligand- and voltage-gated ion channels have identified regions involved in both ligand binding and voltage sensing, but relatively little is known about how such domains are coupled to channel opening. Here we investigate the structural basis for the activation of cyclic-nucleotide-gated channels, which are directly opened by cytoplasmic cyclic nucleotides but are structurally homologous to voltage-gated channels. By constructing chimaeras between cyclic-nucleotide-gated channels cloned from bovine retinal photoreceptors and catfish olfactory neurons, we identify two distinct domains that are important for ligand binding and channel gating. A putative alpha-helix in the carboxy-terminal binding domain determines the selectivity of the channel for activation by cGMP relative to cAMP. A domain in the amino-terminal region determines the ease with which channels open and thus influences agonist efficacy. We propose that channel opening is coupled to an allosteric conformational change in the binding site which enhances agonist binding. Thus, cyclic nucleotides activate the channel by binding tightly to the open state and stabilizing it.