H2-M3 is a class Ib MHC molecule of the mouse with a 10(4)-fold preference for binding N-formylated peptides. To elucidate the basis of this unusual specificity, we expressed and crystallized a soluble form of M3 with a formylated nonamer peptide, fMYFINILTL, and determined the structure by X-ray crystallography. M3, refined at 2.1 A resolution, resembles class la MHC molecules in its overall structure, but differs in the peptide-binding groove. The A pocket, which usually accommodates the free N-terminus of a bound peptide, is closed, and the peptide is shifted one residue, such that the P1 side chain is lodged in the B pocket. The formyl group is coordinated by His-9 and a bound water on the floor of the groove.