Two potential ligand binding sites in the lipocalin beta-lactoglobulin have been postulated for small hydrophobic molecules such as retinol or retinoic acid. An agreement on one of the two alternatives, an interior cavity or a surface cleft, however, has not been achieved. In order to discriminate between these two possibilities, we measured the efficiency of fluorescence resonance energy transfer between the two intrinsic Trp-residues of beta-lactoglobulin and the ligands retinol, retinoic acid and bis-ANS. Using the crystallographic coordinates of beta-lactoglobulin, this efficiency could be accurately computed for both the interior cavity and the surface cleft as ligand binding sites. For the surface cleft, the theoretical value was found to be in excellent agreement with the measured value, whereas for the interior cavity any reasonable agreement would require a dramatic ligand-induced conformational change that can be ruled out due to the protein's known structural stability. Our conclusion that these ligands bind to the surface pocket rather than the interior cavity was further confirmed by competitive binding studies.