Rapid signaling between neurons is mediated by ligand-gated ion channels, cell-surface proteins with an extracellular ligand-binding domain and a membrane-spanning ion channel domain. The degenerin/epithelial sodium channel (DEG/ENaC) superfamily is diverse in terms of its gating stimuli, with some DEG/ENaCs gated by neuropeptides, and others gated by pH, mechanical force or enzymatic activity. The mechanism by which ligands bind to and activate DEG/ENaCs is poorly understood. Here we dissected the structural basis for neuropeptide-gated activity of a neuropeptide-gated DEG/ENaC, FMRFamide-gated sodium channel 1 (FaNaC1) from the annelid worm Malacoceros fuliginosus, using cryo-electron microscopy. Structures of FaNaC1 in the ligand-free resting state and in several ligand-bound states reveal the ligand-binding site and capture the ligand-induced conformational changes of channel gating, which we verified with complementary mutagenesis experiments. Our results illuminate channel gating in DEG/ENaCs and offer a structural template for experimental dissection of channel pharmacology and ion conduction.