Stability and induction of the lysogenic state of bacteriophage $\lambda$ are balanced by a complex regulatory network. A key feature of this network is the mutually exclusive cooperative binding of a repressor dimer (CI) to one of two pairs of binding sites, O R1-O R2 or O R2-O R3. The structural features that underpin the mutually exclusive binding mode are not well understood. Recent studies have demonstrated that CI is an asymmetric dimer. The functional importance of the asymmetry is not fully clear. Due to the asymmetric nature of the CI dimer as well as its binding sites, there are two possible bound orientations. By fluorescence resonance energy transfer measurements we showed that CI prefers one bound orientation. We also demonstrated that the relative configuration of the binding sites is important for CI dimer-dimer interactions and consequent cooperative binding. We proposed that the operator configuration dictates the orientations of the bound CI molecules, which in turn dictates CI cooperative interaction between the O R1-O R2 or O R2-O R3, but not both. Modeling suggests that the relative orientation of the C- and N-terminal domains may play an important role in the mutually exclusive nature of the cooperative binding. This work correlates unique structural features of a transcription regulatory protein with the functional properties of a gene regulatory network. {\textcopyright} 2012 Biophysical Society.