Micro‐myoglobin, the isolated heme‐binding subdomain of myoglobin, is a valuable model system for the investigation of heme recognition and binding by proteins, and provides an example of protein folding induced by cofactor binding. Theoretical studies by molecular dynamics simulations on apo‐ and holo‐micro‐myoglobin show that, by contrast with the case of the full‐length wild‐type protein and in agreement with earlier experimental evidence, the apo‐protein is not stably folded in a native‐like conformation. With the cofactor bound, however, the protein fragment maintains its folded conformation over 1.5 ns in molecular dynamics simulations. Further inspection of the model structures reveals that the role of heme in stabilizing the folded state is not only a result of its direct interactions with binding residues (His93, Arg45 and Lys96), but also derives from its shielding effect on a long‐range electrostatic interaction between Arg45 and Asp60, which, in the molecular dynamics simulations, apparently triggers the unfolding process of apo‐micro‐myoglobin.