The recently reported Middle East respiratory syndrome coronavirus (MERS-CoV) causes severe respiratory illness in humans with an approximately 30% mortality rate. The envelope spike glycoprotein on the surface of MERS-CoV mediates receptor binding, membrane fusion and viral entry. We previously reported two human monoclonal antibodies that target the receptor binding domain (RBD) of the spike and exhibit strong neutralization activity against live and pesudotyped MERS-CoV infection. Here we determined the crystal structure of MERS-CoV RBD bound to the Fab fragment of MERS-27 antibody at 3.20 Å resolution. The MERS-27 epitope in the RBD overlaps with the binding site of the MERS-CoV receptor DPP4. Further biochemical, viral entry and neutralization analyses identified two critical residues in the RBD for both MERS-27 recognition and DPP4 binding. One of the residues, Trp535, was found to function as an anchor residue at the binding interface with MERS-27. Upon receptor binding, Trp535 interacts with the N-linked carbohydrate moiety of DPP4. Thus, MERS-27 inhibits MERS-CoV infection by directly blocking both protein-protein and protein-carbohydrate interactions between MERS-CoV RBD and DPP4. These results shed light on the molecular basis of MERS-27 neutralization and will assist in the optimization of MERS-27 as a tool to combat MERS-CoV infection.