Allosteric modulation of G protein-coupled receptors (GPCRs) is a major paradigm in drug discovery. Despite decades of research, a molecular level understanding of the general principals that govern the myriad pharmacological effects exerted by GPCR allosteric modulators remains limited. The M4 muscarinic acetylcholine receptor (M4 mAChR) is a well-validated and clinically relevant allosteric drug target for several major psychiatric and cognitive disorders. Here, we present high-resolution cryo-electron microscopy structures of the M4 mAChR bound to a cognate Gi1 protein and the high affinity agonist, iperoxo, in the absence and presence of two different positive allosteric modulators, LY2033298 or VU0467154. We have also determined the structure of the M4 mAChR-Gi1 complex bound to its endogenous agonist, acetylcholine (ACh). Structural comparisons, together with molecular dynamics, mutagenesis, and pharmacological validations, have provided in-depth insights into the role of structure and dynamics in orthosteric and allosteric ligand binding, global mechanisms of receptor activation, cooperativity, probe-dependence, and species variability; all key hallmarks underpinning contemporary GPCR drug discovery.