Ionotropic glutamate receptors (iGluRs) are tetrameric ligand-gated ion channels that play a crucial role in excitatory synaptic transmission in the central nervous system. Each subunit contributes with three transmembrane domains (M1, M3, and M4) and a pore loop (M2) forming the channel pore. Recent studies suggest that the architecture of all eukaryotic iGluRs derives from a common prokaryotic ancestral receptor that lacks M4 and consists only of the transmembrane domain segments M1-M3. Although a crucial contribution of M4 to the assembly and trafficking of iGluRs is suspected, the role of this additionally evolved domain in receptor function remains controversial. Here, we investigated how deletions and mutations of M4 in members of the NMDA receptor subfamily, the conventional heteromeric GluN1/GluN2 and glycine-gated GluN1/GluN3 NMDA receptors, affect expression and function in Xenopus oocytes. We show that deletion of M4 in the GluN1, GluN2, or GluN3 subunit, despite retained receptor assembly and cell surface expression, results in nonfunctional membrane receptors. Coexpression of the corresponding M4 domains as an isolated peptide in M4-deleted receptors rescued receptor function of GluN1/GluN2A NMDARs without altering the affinity of glutamate or glycine. Substitution of non-conserved residues and insertion of interhelical disulfide bridges confirmed the proximity of positions M813 and F817 in M4 of GluN1 to residues of the TMs of neighboring subunits. Electrophysiological analyses of agonist-induced receptor function and its modulation by the neurosteroid pregnenolone sulfate (PS) at mutations of the GluN1-M4/GluN2/3-TM interface indicate a crucial role of interdomain interactions in the functional coupling of M4 to the nuclear receptor and the modulatory effect of PS. Our results show that although the M4 domains in NMDA receptors are not important for receptor assembly and surface expression, residues at the subunit interface are substantially involved in M4 recognition to the core receptor and regulation of PS efficacy. Because mutations in the M4 of GluN1 specifically resulted in loss of PS-induced inhibition of NMDA receptor currents, our results point to distinct roles of M4s in NMDA receptor modulation and highlight the importance of evolutionarily newly evolved M4s for selective in vivo modulation of glutamate- and glycine-activated NMDA receptors by steroids.