General anesthesia, a routine and indispensable tool in modern surgery still remains a poorly understood phenomenon. Recent studies suggest that general anesthetics (GAs) mediate many of their anesthetic actions by binding to intra- or inter-subunit transmembrane domain (TMD) cavities of pentameric ligand gated ion channels (pLGICs) in the brain. The molecular details of this interaction including location of binding sites, conformational changes induced and residues involved in allosteric transduction remain largely unknown. We are using GLIC, a prokaryotic pLGIC to elucidate mechanisms underlying the action of the commonly used intravenous GA, propofol.We individually introduced cysteines at seven sites in the TMD that frame the intra- (I201C in M1, V241C in M2 and T254C in M3), and inter-subunit (N238C, L240C and E242C in M2) cavities as well as the channel lumen (T243C in M2) in GLIC. Propofol slowed the rate of modification of L240C (inter-subunit) and increased the rate of modification of T254C (intra-subunit) suggesting that the extracellular end of the TMD undergoes propofol-induced structural motions that rearrange these cavities and change the local environment at these sites. An increase in modification rate of T254C makes it unlikely that it faces into the propofol binding site as suggested by a recent crystal structure of GLIC with bound propofol (Nury et al., 2011). Moreover, we found that perturbation of residues in the inter-subunit cavity and not those in the intra-subunit cavity caused propofol to potentiate GLIC currents rather than inhibit. Taken together our results show a significant role of the inter-subunit cavity in propofol modulation of pLGICs and reveal conformational changes associated with propofol's actions.