Despite recent advances in crystallography and the availability of G-protein-coupled receptor (GPCR) structures, little is known about the mechanism of their activation process, as only the β2 adrenergic receptor (β2AR) and rhodopsin have been crystallized in fully active conformations. Here we report the structure of an agonist-bound, active state of the human M2 muscarinic acetylcholine receptor stabilized by a G-protein mimetic camelid antibody fragment isolated by conformational selection using yeast surface display. In addition to the expected changes in the intracellular surface, the structure reveals larger conformational changes in the extracellular region and orthosteric binding site than observed in the active states of the β2AR and rhodopsin. We also report the structure of the M2 receptor simultaneously bound to the orthosteric agonist iperoxo and the positive allosteric modulator LY2119620. This structure reveals that LY2119620 recognizes a largely pre-formed binding site in the extracellular vestibule of the iperoxo-bound receptor, inducing a slight contraction of this outer binding pocket. These structures offer important insights into the activation mechanism and allosteric modulation of muscarinic receptors. Very little is known about how a G-protein-coupled receptor (GPCR) transitions from an inactive to an active state, but this study has solved the X-ray crystal structures of the human M2 muscarinic acetylcholine receptor bound to a high-affinity agonist in an active state and to a high-affinity agonist and a small-molecule allosteric modulator in an active state; the structures provide insights into the activation mechanism and allosteric modulation of muscarinic receptors. The structures of many G-protein-coupled receptors (GPCRs), including members of the class B and class F families, are now available but little is known about the transitions from the inactive to active states. In this study the authors solve the X-ray crystal structures of the human M2 muscarinic acetylcholine receptor in the active state bound to the agonist iperoxo alone and in combination with LY2119620, a positive allosteric modulator. The structures reveal that the activated M2 receptor has an extremely small orthosteric binding site, with LY2119620 'sitting' right on top of the agonist. The authors also note that the region that makes up the allosteric site in the inactive conformation of the M2 receptor is too large to bind to LY2119620; this means that the extracellular region needs to contract (by binding to the high-affinity agonist) before LY2119620 can bind to the allosteric site. This GPCR is essential for the physiological control of cardiovascular function, cognition, and pain perception, and since allosteric sites are less conserved in sequence and structure than the orthosteric binding site, the hope is that ligands that bind to allosteric sites could be turned into drugs that selectively interact with only one of the five muscarinic receptor subtypes.