Susceptibility to insulin-dependent diabetes mellitus is linked to MHC class II genes. The only MHC class II molecule expressed by nonobese diabetic (NOD) mice, I-Ag7, shares a common alpha-chain with I-Ad but has a peculiar beta-chain. As with most beta-chain alleles linked to diabetes susceptibility, I-Ag7 contains a nonaspartic residue at position beta57. We have produced large amounts of empty I-Ag7 molecules using a fly expression system to characterize its biochemical properties and peptide binding by phage-displayed peptide libraries. The identification of a specific binding peptide derived from glutamic acid decarboxylase (GAD65) has allowed us to crystallize and obtain the three-dimensional structure of I-Ag7. Structural information was critical in evaluating the binding studies. I-Ag7, like I-Ad, appears to be very promiscuous in terms of peptide binding. Their binding motifs are degenerate and contain small and/or small hydrophobic residues at P4 and P6 of the peptide, a motif frequently found in most globular proteins. The degree of promiscuity is increased for I-Ag7 over I-Ad as a consequence of a larger P9 pocket that can specifically accommodate negatively charged residues, as well as possibly residues with bulky side chains. So, although I-Ad and I-Ag7 are structurally closely related, stable molecules and good peptide binders, they differ functionally in their ability to bind significantly different peptide repertoires that are heavily influenced by the presence or the absence of a negatively charged residue at position 57 of the beta-chain. These characteristics link I-Ag7 with autoimmune diseases, such as insulin-dependent diabetes mellitus.