We have cloned, expressed, and characterized two naturally occurring variations of the IgG-binding domain of streptococcal protein G. The domain is a stable cooperative folding unit of 56 amino acids, which maintains a unique folded structure without disulfide cross-links or tight ligand binding. We have studied the thermodynamics of the unfolding reaction for the two versions of this domain, designated B1 and B2, which differ by six amino acids. They have denaturation temperatures of 87.5 degrees C and 79.4 degrees C, respectively at pH 5.4, as determined by differential scanning calorimetry. Thermodynamic state functions for the unfolding reaction (delta G, delta H, delta S, and delta Cp) have been determined and reveal several interesting insights into the behavior of very small proteins. First, though the B1 domain has a heat denaturation point close to 90 degrees C, it is not unusually stable at physiologically relevant temperatures (delta G = 25 kJ/mol at 37 degrees C). This behavior occurs because the stability profile (delta G vs temperature) is flat and shallow due to the small delta S and delta Cp for unfolding. Related to this point is the second observation that small changes in the free energy of unfolding of the B-domain due to mutation or change in solvent conditions lead to large shifts in the heat denaturation temperature. Third, the magnitude and relative contributions of hydrophobic vs nonhydrophobic forces (per amino acid residue) to the total free energy of folding of the B-domain are remarkably typical of other globular proteins of much larger size.