Cys-loop receptors constitute a superfamily of pentameric ligand-gated ion channels (pLGICs), including receptors for acetylcholine, serotonin, glycine and γ-aminobutyric acid. Several bacterial homologues have been identified that are excellent models for understanding allosteric binding of alcohols and anesthetics in human Cys-loop receptors. Recently, we showed that a single point mutation on a prokaryotic homologue (GLIC) could transform it from a channel weakly potentiated by ethanol into a highly ethanol-sensitive channel. Here, we have employed molecular simulations to study ethanol binding to GLIC, and to elucidate the role of the ethanol-enhancing mutation in GLIC modulation. By performing 1-µs simulations with and without ethanol on wild-type and mutated GLIC, we observed spontaneous binding in both intra-subunit and inter-subunit transmembrane cavities. In contrast to the glycine receptor GlyR, in which we previously observed ethanol binding primarily in an inter-subunit cavity, ethanol primarily occupied an intra-subunit cavity in wild-type GLIC. However, the highly ethanol-sensitive GLIC mutation significantly enhanced ethanol binding in the inter-subunit cavity. These results demonstrate dramatic effects of the F(14')A mutation on the distribution of ligands, and are consistent with a two-site model of pLGIC inhibition and potentiation.