The modulation of pentameric ligand-gated ion channels (pLGICs) by divalent cations is believed to play an important role in their regulation in a physiological context. Ions such as calcium or zinc influence the activity of pLGIC neurotransmitter receptors by binding to their extracellular domain and either potentiate or inhibit channel activation. Here we have investigated by electrophysiology and X-ray crystallography the effect of divalent ions on ELIC, a close prokaryotic pLGIC homologue of known structure. We found that divalent cations inhibit the activation of ELIC by the agonist cysteamine, reducing both its potency and, at higher concentrations, its maximum response. Crystal structures of the channel in complex with barium reveal the presence of several distinct binding sites. By mutagenesis we confirmed that the site responsible for divalent inhibition is located at the outer rim of the extracellular domain, at the interface between adjacent subunits but at some distance from the agonist binding region. Here, divalent cations interact with the protein via carboxylate side-chains, and the site is similar in structure to calcium binding sites described in other proteins. There is evidence that other pLGICs may be regulated by divalent ions binding to a similar region, even though the interacting residues are not conserved within the family. Our study provides structural and functional insight into the allosteric regulation of ELIC and is of potential relevance for the entire family.