The translocator/tryptophan-rich sensory protein (TSPO) is a membrane protein belonging to the benzodiazepine receptor (MBR) family of proteins present in most organisms. TSPO is known as a clinical biomarker of neuroinflammation, and its importance as a potential therapeutic target in neurodegenerative and inflammatory diseases is increasingly recognized. Moreover, TSPO is often overexpressed in brain tumors, making it an important diagnostic tool. This study investigates the mechanisms by which TSPO binds and mediates the photo-oxidative degradation of its ligand, protoporphyrin IX (PpIX), which is used in photodynamic therapy for cancer treatment. Using mutagenesis, spectroscopy-based functional assays, and electron spin resonance techniques, the study identifies specific residues critical to the binding and photo-oxidation of PpIX. Furthermore, the study provides structural evidence of the highly conserved intracellular loop 1 (LP1) and reveals how LP1 interacts with several key loop segments, stabilizing and allowing for proper ligand binding. These results offer an improved understanding of TSPO-mediated PpIX degradation and have significant implications for developing new therapeutics targeting TSPO.