Current homology-modelling methods do not consider small molecules in their automated processes. Therefore, the development of a reliable tool for protein–ligand homology modelling is an important next step in generating plausible models for molecular interactions. Two automated protein–ligand homology-modelling strategies, requiring no expert knowledge from the user, are investigated here. Both employ the “induced fit” concept with flexibility in side chains and ligand. The most successful strategy superimposes the new ligand over the original ligand before homology modelling, allowing the new ligand to be taken into consideration during protein modelling (rather than after), facilitating conformational change in the local backbone if necessary. We show that this approach results in successful modelling of the ligand and key binding-site residues of angiotensin-converting enzyme 2 (ACE2) from its homologue ACE, which is not possible via conventional homology modelling or by homology modelling followed by docking. Several other difficult target complexes are also successfully modelled, reproducing native protein–ligand contacts with significantly different biological substrates and different binding-site conformations. These include the modelling of Cdk5 (cyclin-dependent kinase 5) from Cdk2, thymidine phosphorylase from a bacterial homologue, and dihydrofolate reductase from a recombinant variant with a markedly different inhibitor. In terms of average modelling quality across 82 targets, the ligand RMSD with respect to the experimental structure is 1.4 Å (and 2.0 Å for the protein binding site) for “easy” cases and 2.9 Å for the ligand (and 2.7 Å for the protein binding site) in “hard” cases. This demonstrates the importance of selecting an optimal template. Ligand-modelling accuracy is strongly dependent on target–template ligand structural similarity, rather than target–template sequence identity. However, protein-modelling accuracy is dependent on both. Our automated protein–ligand homology-modelling strategy generates a higher degree of accuracy than homology modelling followed by docking, generating an average ligand RMSD that is 1–2 Å better than docking with homology models.