A yeast co-expression system, which can surface display peptide from influenza hemagglutinin (FLU) bound by soluble DR1 secreted by the same yeast cell, has been developed. In order to evaluate the performance of this system for studying the peptide binding properties of class II MHC molecules, initial studies focused on characterizing the peptide side chain preferences at the dominant anchor position (P1) of peptide/HLA-DR1 complexes. A set of yeast surface tethered FLU peptide analogues containing all natural amino acids (except for Cys) at P1 position have been tested for their ability to bind and anchor soluble HLA-DR1 to the cell surface. Flow cytometry analysis enabled discrimination of P1 amino acids supporting binding to the MHC and further allows evaluation of relative binding affinities. We find that , affinities follow the order Phe ≥ Tyr ≥ Trp ≈ Met ≈ Leu ≈ Ile > Val. All other amino acids tested yield no detectable binding to HLA-DR1, in agreement with binding preferences determined using phage display and/or other methods. We are extending this system to (1) study the peptide binding motif of HLA-DQ8, a major risk factor for susceptibility to type I diabetes, and (2) develop and validate an approach for retargeting defined MHC toward novel peptides for possible applications in vaccine technology. The yeast co-expression methodology enables both characterization and engineering of class II MHC peptide binding by manipulating both MHC molecules and peptides easily and efficiently in a format suitable for high throughput screening.