A localized change in a protein, which occurs as a result of either ligand binding or single amino acid substitution, necessarily encounters the conformational fluctuation of the rest of the protein. Both the entropy and the enthalpy associated with the change consist of contributions from fluctuations in the atoms surrounding the localized site, but they compensate. A novel thermodynamic ensemble with a fluctuating boundary is proposed for studying the energetics of localized changes in proteins. Using an ideal gas as illustration, it is shown that the entropy-enthalpy compensation reflects the flexibility of the surrounding structures-its fluctuations contribute a term to the entropy and the conformational change associated with the induced fit contributes a term to the enthalpy.