An internal cysteine protease domain (CPD) autoproteolytically regulates Clostridium difficile glucosylating toxins by releasing a cytotoxic effector domain into target cells. CPD activity is itself allosterically regulated by the eukaryotic-specific molecule inositol hexakisphosphate (InsP 6). Although allostery controls the function of most proteins, the molecular details underlying this regulatory mechanism are often difficult to characterize. Here we use chemical probes to show that apo-CPD is in dynamic equilibrium between active and inactive states. InsP 6 dramatically shifts this equilibrium towards an active conformer that is further restrained upon binding a suicide substrate. Structural analyses combined with systematic mutational and disulfide bond engineering studies reveal that residues within a β-hairpin region functionally couple the InsP 6 binding site to the active site. Collectively, our results identify an allosteric circuit that allows bacterial virulence factors to sense and respond to the eukaryotic environment.