G protein-coupled receptors (GPCRs) play crucial roles in cellular signaling, and the VPAC1 receptor is an important member of the secretin (class B1) subfamily. This study investigates the structural and molecular mechanisms underlying the non-functional nature of VPAC1 isoform 2, which contains an extended N-terminal domain compared to the canonical isoform 1. Through computational approaches including molecular modeling and molecular dynamics simulations, we show that the 17-residue α-helical insertion in the extracellular domain (ECD) of isoform 2 acts as an endogenous antagonist. Our findings reveal that this inserted α-helix adopts a conformation that physically occupies the binding site intended for the Vasoactive Intestinal Peptide (VIP), forming hydrogen bonds with critical receptor residues and exhibiting sequence similarity to portions of the VIP peptide itself. Additionally, the inserted sequence stabilizes the ECD in a conformation that prevents the dynamic “opening” movement necessary for peptide binding. These results provide novel insights into an unusual auto-inhibitory mechanism in GPCRs and highlight the potential implications for understanding receptor diversity in pathophysiological conditions and therapeutic interventions.