Free L-tryptophan (L-Trp) induces the expression of the Escherichia coli tryptophanase operon, leading to the production of indole from L-Trp. Tryptophanase operon expression is controlled via a mechanism involving the tryptophan-dependent stalling of ribosomes engaged in translation of tnaC, a leader sequence upstream of tnaA that encodes a 24-residue peptide functioning as a sensor for L-Trp. Although extensive biochemical characterization has revealed the elements of the TnaC peptide and the ribosome that are responsible for translational arrest, the molecular mechanism underlying the recognition and response to L-Trp by the TnaC-ribosome complex remains unknown. Here, we use a combined biochemical and structural approach to characterize a variant of TnaC (R23F) in which stalling by L-Trp is enhanced because of reduced cleavage of TnaC(R23F)-peptidyl-tRNA. In contrast to previous data originated from lower resolution structural studies, we show that the TnaC-ribosome complex captures a single L-Trp molecule to undergo tryptophan-dependent termination arrest and that nascent TnaC prevents the catalytic GGQ loop of release factor 2 from adopting an active conformation at the peptidyl transferase center. In addition, we show that the conformation of the L-Trp binding site is not altered by the R23F mutation. This leads us to propose a model in which rates of TnaC-peptidyl-tRNA cleavage by release factor and binding of the L-Trp ligand to the translating ribosome determine the tryptophan sensitivity of the wild-type and mutant TnaC variants. Thus, our study reveals a strategy whereby a nascent peptide assists the bacterial ribosome in sensing a small metabolite.