The third component of complement, C3, plays a central role in activation of the classical, alternative, and lectin pathways of complement activation. Recently, we have identified a 13-residue cyclic peptide (named Compstatin) that specifically binds to C3 and inhibits complement activation. To investigate the topology and the contribution of each critical residue to the binding of Compstatin to C3, we have now determined the solution structure using 2D NMR techniques; we have also synthesized substitution analogues and used these to study the structure-function relationships involved. Finally, we have generated an ensemble of a family of solution structures of the peptide with a hybrid distance geometry-restrained simulated-annealing methodology, using distance, dihedral angle, and 3J(NH-Halpha)-coupling constant restraints. The Compstatin structure contained a type I beta-turn comprising the segment Gln5-Asp6-Trp7-Gly8. Preference for packing of the hydrophobic side chains of Val3, Val4, and Trp7 was observed. The generated structure was also analyzed for consistency using NMR parameters such as NOE connectivity patterns, 3J(NH-Halpha)-coupling constants, and chemical shifts. Analysis of Ala substitution analogues suggested that Val3, Gln5, Asp6, Trp7, and Gly8 contribute significantly to the inhibitory activity of the peptide. Substitution of Gly8 caused a 100-fold decrease in inhibitory potency. In contrast, substitution of Val4, His9, His10, and Arg11 resulted in minimal change in the activity. These findings indicate that specific side-chain interactions and the beta-turn are critical for preservation of the conformational stability of Compstatin and they might be significant for maintaining the functional activity of Compstatin.