Myeloid differentiation factor 2 (MD-2) is an extracellular protein, associated with the ectodomain of TLR4, that plays a critical role in the recognition of bacterial LPS. Despite high overall structural and functional similarity, human (h) and murine (m) MD-2 exhibit several species-related differences. hMD-2 is capable of binding LPS in the absence of TLR4, whereas mMD-2 supports LPS responsiveness only when mMD-2 and mTLR4 are coexpressed in the same cell. Previously, charged residues at the edge of the LPS binding pocket have been attributed to this difference. In this study, site-directed mutagenesis was used to explore the hydrophobic residues within the MD-2 binding pocket as the source of functional differences between hMD-2 and mMD-2. Whereas decreased hydrophobicity of residues 61 and 63 in the hMD-2 binding pocket retained the characteristics of wild-type hMD-2, a relatively minor change of valine to alanine at position 135 completely abolished the binding of LPS to the hMD-2 mutant. The mutant, however, retained the LPS binding in complex with TLR4 and also cell activation, resulting in a murine-like phenotype. These results were supported by the molecular dynamics simulation. We propose that the residue at position 135 of MD-2 governs the dynamics of the binding pocket and its ability to accommodate lipid A, which is allosterically affected by bound TLR4.