Ionotropic glutamate receptors (iGluRs) mediate fast excitatory neurotransmission and are key nervous system drug targets. While diverse pharmacological tools have yielded insight into iGluR extracellular domain function, less is known about molecular mechanisms underlying the ion conduction gating process within the transmembrane domain (TMD). We have discovered a novel NMDAR positive allosteric modulator (PAM), GNE-9278, with a unique binding site on the extracellular surface of the TMD. Mutation of a single residue near the Lurcher motif on GluN1 M3 can convert GNE-9278 modulation from positive to negative, and replacing three AMPAR pre-M1 residues with corresponding NMDAR residues can confer GNE-9278 sensitivity to AMPARs. Modulation by GNE-9278 is state-dependent and significantly alters extracellular domain pharmacology. The unique properties and structural determinants of GNE-9278 reveal new modulatory potential of the iGluR TMD.