The movement of core-lipopolysaccharide across the inner membrane of Gram-negative bacteria is catalysed by an essential ATP-binding cassette transporter, MsbA. Recent structures of MsbA and related transporters have provided insights into the molecular basis of active lipid transport; however, structural information about their pharmacological modulation remains limited. Here we report the 2.9 angstrom resolution structure of MsbA in complex with G907, a selective small-molecule antagonist with bactericidal activity, revealing an unprecedented mechanism of ABC transporter inhibition. G907 traps MsbA in an inward-facing, lipopolysaccharide-bound conformation by wedging into an architecturally conserved transmembrane pocket. A second allosteric mechanism of antagonism occurs through structural and functional uncoupling of the nucleotide-binding domains. This study establishes a framework for the selective modulation of ABC transporters and provides rational avenues for the design of new antibiotics and other therapeutics targeting this protein family.