The α1-subunit containing glycine receptors (GlyRs) is potentiated by ethanol, in part, by intracellular Gβγ actions. Previous studies have suggested that molecular requirements in the large intracellular domain are involved; however, the lack of structural data about this region has made it difficult to describe a detailed mechanism. Using circular dichroism and molecular modeling, we generated a full model of the α1-GlyR, which includes the large intracellular domain and provides new information on structural requirements for allosteric modulation by ethanol and Gβγ. The data strongly suggest the existence of an α-helical conformation in the regions near transmembrane (TM)-3 and TM4 of the large intracellular domain. The secondary structure in the N-terminal region of the large intracellular domain near TM3 appeared critical for ethanol action, and this was tested using the homologous domain of the γ2-subunit of the GABAA receptor predicted to have little helical conformation. This region of γ2 was able to bind Gβγ and form a functional channel when combined with α1-GlyR, but it was not sensitive to ethanol. Mutations in the N- and C-terminal regions introduced to replace corresponding amino acids of the α1-GlyR sequence restored the ability to be modulated by ethanol and Gβγ. Recovery of the sensitivity to ethanol was associated with the existence of a helical conformation similar to α1-GlyR, thus being an essential secondary structural requirement for GlyR modulation by ethanol and G protein.