The functions of G-protein-coupled receptors (GPCRs) are primarily mediated and modulated by three families of proteins: the heterotrimeric G proteins, the G-protein-coupled receptor kinases (GRKs) and the arrestins. G proteins mediate activation of second-messenger-generating enzymes and other effectors, GRKs phosphorylate activated receptors, and arrestins subsequently bind phosphorylated receptors and cause receptor desensitization. Arrestins activated by interaction with phosphorylated receptors can also mediate G-protein-independent signalling by serving as adaptors to link receptors to numerous signalling pathways. Despite their central role in regulation and signalling of GPCRs, a structural understanding of β-arrestin activation and interaction with GPCRs is still lacking. Here we report the crystal structure of β-arrestin-1 (also called arrestin-2) in complex with a fully phosphorylated 29-amino-acid carboxy-terminal peptide derived from the human V2 vasopressin receptor (V2Rpp). This peptide has previously been shown to functionally and conformationally activate β-arrestin-1 (ref. ). To capture this active conformation, we used a conformationally selective synthetic antibody fragment (Fab30) that recognizes the phosphopeptide-activated state of β-arrestin-1. The structure of the β-arrestin-1–V2Rpp–Fab30 complex shows marked conformational differences in β-arrestin-1 compared to its inactive conformation. These include rotation of the amino- and carboxy-terminal domains relative to each other, and a major reorientation of the ‘lariat loop’ implicated in maintaining the inactive state of β-arrestin-1. These results reveal, at high resolution, a receptor-interacting interface on β-arrestin, and they indicate a potentially general molecular mechanism for activation of these multifunctional signalling and regulatory proteins.