Delta selective compound 2 (DS2) is one of the most widely used tools to study selective actions mediated by δ subunit-containing GABAA receptors. DS2 was discovered over 10 years ago, but despite great efforts, the precise molecular site of action has remained elusive.Using a combination of computational modeling, site-directed mutagenesis and cell-based pharmacological assays, we probed three potential binding sites for DS2 and analogs at α4β1δ receptors: an α4(+)δ(-) interface site in the extracellular domain (ECD), equivalent to the diazepam binding site in αβγ2 receptors, and two sites in the transmembrane domain (TMD); one in the α4(+)β1(-) and one in the α4(-)β1(+) interface, with the α4(-)β1(+) site corresponding to the binding site for etomidate and a recently disclosed low-affinity binding site for diazepam. We show that mutations in the ECD site did not abrogate DS2 modulation. However, mutations in the TMD α4(+)β1(-) interface, either α4(S303L) of the α4(+)-side or β1(I289Q) of the β1(-)-side, convincingly disrupted the positive allosteric modulation by DS2. This was consistently demonstrated both in an assay measuring membrane potential changes and by whole-cell patchclamp electrophysiology and rationalized by docking studies. Importantly, general sensitivity to modulators was not compromised in the mutated receptors. This study sheds important light on the long-sought molecular recognition site for DS2, refutes the misconception that the selectivity of DS2 for δ-containing receptors is caused by a direct interaction with the δ-subunit, and instead points towards a functional selectivity of DS2 and its analogs via a surprisingly well-conserved binding pocket in the TMD.Significance statementδ-Containing GABAA receptors represent potential drug targets for the treatment of several neurological conditions with aberrant tonic inhibition. Yet, no drugs are currently in clinical use. With the identification of the molecular determinants responsible for positive modulation by the know compound DS2, the ground is laid for design of ligands that selectively target δ-containing GABAA receptor subtypes, for better understanding of tonic inhibition, and, ultimately, for rational development of novel drugs.