Allosteric modulation of G protein-coupled receptors (GPCRs) is a major paradigm in drug discovery. Despite decades of research, a molecular-level understanding of the general principles that govern the myriad pharmacological effects exerted by GPCR allosteric modulators remains limited. The M₄ muscarinic acetylcholine receptor (M₄ mAChR) is a validated and clinically relevant allosteric drug target for several major psychiatric and cognitive disorders. In this study, we rigorously quantified the affinity, efficacy, and magnitude of modulation of two different positive allosteric modulators, LY2033298 (LY298) and VU0467154 (VU154), combined with the endogenous agonist acetylcholine (ACh) or the high-affinity agonist iperoxo (Ipx), at the human M₄ mAChR. By determining the cryo-electron microscopy structures of the M₄ mAChR, bound to a cognate G_i1 protein and in complex with ACh, Ipx, LY298-Ipx, and VU154-Ipx, and applying molecular dynamics simulations, we determine key molecular mechanisms underlying allosteric pharmacology. In addition to delineating the contribution of spatially distinct binding sites on observed pharmacology, our findings also revealed a vital role for orthosteric and allosteric ligand–receptor–transducer complex stability, mediated by conformational dynamics between these sites, in the ultimate determination of affinity, efficacy, cooperativity, probe dependence, and species variability. There results provide a holistic framework for further GPCR mechanistic studies and can aid in the discovery and design of future allosteric drugs.