The mechanism of activation of the transient receptor potential vanilloid 4 (TRPV4) channel by 4alpha-phorbol esters was investigated by combining information from chemical modification of 4alpha-phorbol-didecanoate (4alpha-PDD, 2a), site-directed mutagenesis, Ca(2+) imaging, and electrophysiology. Binding of 4alpha-phorbol esters occurs in a loop in the TM3-TM4 domain of TRPV4 that is analogous to the capsaicin binding site of TRPV1, and the ester decoration of ring C and the A,B ring junction are critical for activity. The lipophilic ester groups on ring C serve mainly as a steering element, affecting the orientation of the diterpenoid core into the ligand binding pocket, while the nature of the A,B ring junction plays an essential role in the Ca(2+)-dependence of the TRPV4 response. Taken together, our results show that 4alpha-phorbol is a useful template to investigate the molecular details of TRPV4 activation by small molecules and obtain information for the rational design of structurally simpler ligands for this ion channel.