p97, also known as valosin-containing protein (VCP), processes ubiquitinated substrates and plays a central role in cellular protein homeostasis. Mutations in human p97 are associated with multisystem proteinopathy (MSP), a dominantly inherited degenerative disorder that can affect muscle, bone and the central nervous system. It is also a drug target for cancer therapy with various inhibitors developed over the past decade. Despite significant structural insights into the fungal homologue of p97, Cdc48, little is known about how human p97 processes its substrates and how the activity is allosterically affected by inhibitors. Here, we report a series of cryo-electron microscopy (cryo-EM) structures of substrate-engaged human p97 complex with resolutions ranging from 2.9 to 3.8 Angstrom that captured power stroke-like motions of both the D1 and D2 ATPase rings of p97. The structures elucidated how the unfolded substrate is engaged in the pore at atomic level. Critical conformational changes of the inter-subunit signaling (ISS) motifs were revealed, providing molecular insights into substrate translocation. Furthermore, we also determined cryo-EM structures of human p97 in complex with NMS-873, the most potent p97 inhibitor, at a resolution of 2.4 Angstrom. The structures showed that NMS-873 binds at a cryptic groove in the D2 domain and interacts with the ISS motif, preventing its conformational change, thus blocking substrate translocation allosterically. Finally, using NMS-873 at a substoichiometric concentration, we captured a series of intermediate states, suggesting how the cofactor Npl4 coordinates with the D1 ring of p97 to initiate the translocation.