Atypical Chemokine Receptor 3 (ACKR3) belongs to the G protein-coupled receptor family but it does not signal through G proteins. The structural properties that govern the functional selectivity and the conformational dynamics of ACKR3 activation are poorly understood. Here, we combined hydrogen/deuterium exchange mass spectrometry, site-directed mutagenesis, and molecular dynamics simulations to examine the binding mode and mechanism of action of ACKR3 ligands of different efficacies. Our results show that activation or inhibition of ACKR3 is governed by intracellular conformational changes of helix 6, intracellular loop 2, and helix 7, while the DRY motif becomes protected during both processes. Moreover, we identified the binding sites and the allosteric modulation of ACKR3 upon β-arrestin 1 binding. In summary, this study highlights the structure-function relationship of small ligands, the binding mode of β-arrestin 1, the activation dynamics, and the atypical dynamic features in ACKR3 that may contribute to its inability to activate G proteins.