Desensitization, signaling, and trafficking of G-protein-coupled receptors (GPCRs) are critically regulated by multifunctional adaptor proteins, β-arrestins (βarrs). The two isoforms of βarrs (βarr1 and 2) share a high degree of sequence and structural similarity; still, however, they often mediate distinct functional outcomes in the context of GPCR signaling and regulation. A mechanistic basis for such a functional divergence of βarr isoforms is still lacking. By using a set of complementary approaches, including antibody-fragment-based conformational sensors, we discover structural differences between βarr1 and 2 upon their interaction with activated and phosphorylated receptors. Interestingly, domain-swapped chimeras of βarrs display robust complementation in functional assays, thereby linking the structural differences between receptor-bound βarr1 and 2 with their divergent functional outcomes. Our findings reveal important insights into the ability of βarr isoforms to drive distinct functional outcomes and underscore the importance of integrating this aspect in the current framework of biased agonism.