Cereblon, a primary target of thalidomide and its derivatives, has been characterized structurally from both bacteria and animals. Especially well studied is the thalidomide binding domain, CULT, which shows an invariable structure across different organisms and in complex with different ligands. Here, based on a series of crystal structures of a bacterial representative, we reveal the conformational flexibility and structural dynamics of this domain. In particular, we follow the unfolding of large fractions of the domain upon release of thalidomide in the crystalline state. Our results imply that a third of the domain, including the thalidomide binding pocket, only folds upon ligand binding. We further characterize the structural effect of the C-terminal truncation resulting from the mental-retardation linked R419X nonsense mutation in vitro and offer a mechanistic hypothesis for its irresponsiveness to thalidomide. At 1.2Å resolution, our data provide a view of thalidomide binding at atomic resolution.