We demonstrate that cytochrome P450 BM-3 in complex with N-palmitoylglycine undergoes a spin state change between room temperature, where optimal activity is seen, and low temperatures, where X-ray diffraction characterization has been carried out. On the basis of NMR measurements of the full-length protein, this spin state change is likely to be accompanied by a general structural rearrangement in the enzyme pocket. The substrate remains bound at all temperatures. We propose that the substrate may "slide" from a position directly atop the heme (thus displacing the ligating water) to the more distant position (thus restoring the ligating water) as the temperature is lowered. This proposal is evaluated on the basis of computational modeling of the protein-ligand complex, using a novel induced fit methodology. We thereby generate a structure with the ligand in close contact with the heme, similar in energy to the experimental structure. With this combination of theory and experiment we provide a specific proposal of how ligands may be positioned for chemistry for this enzyme.