The MHC class II molecule of the non-obese diabetic (NOD) mice, I-Ag7, is associated with susceptibility to autoimmune diabetes. To try to understand the molecular basis of this association, we analyzed the peptide binding properties and intracellular behavior of I-Ag7 in comparison with other I-A haplotypes. We found that I-Ag7 molecules manifested normal intracellular trafficking and lifespan, and a small but clearly detectable fraction of I-Ag7 in the cells formed SDS-resistant compact dimers. The binding of an antigenic reference peptide to I-Ag7 was stable and was accompanied by compact dimer formation. Our analysis of the binding specificity of I-Ag7 revealed a peptide binding motif of nine amino acids with a degenerate position at P1 and three conserved anchor positions: P4, P6 and P9. An allele-specific preference for negatively charged residues was found at P9, apparently due to the presence of the rare Ser residue at position 57 of the I-Ag7 beta chain. These findings could have implications for the mechanisms of MHC-mediated susceptibility to autoimmune diabetes in the NOD mice.