Intracellular lipid binding proteins (iLBPs) share distinctive features: a rigid protein structure composed of a β-barrel and an α-helix cap, and a large internalized water cluster. Although X-ray crystallographic studies have elucidated the three-dimensional structures of iLBPs, the protein dynamics and the role of the large water cluster in protein function remain unknown. In the present study, we performed molecular dynamics (MD) simulations on human heart-type fatty acid binding protein (FABP3), a typical iLBP that is highly expressed in heart and skeletal muscles, and showed that an altered mode of protein dynamics and rearrangement of the internal water cluster are key elements of ligand binding. Using simulations without a ligand at 310 K, we first demonstrated that FABP3 adopts a wide-open conformation, achieved by a combination of two modes of dynamics: portal opening by a domain motion of the α-helices and gap opening by cleavage of the hydrogen-bond network between βD and βE strands. In contrast, stearic acid-bound FABP3 mainly adopted a closed form, stabilized by the H-bond network inside the binding cavity, which latches the gap, and by protein-ligand hydrophobic interactions. The wide-open apo FABP3 represents a biologically important conformation relevant to ligand loading.