The free energy of binding of a ligand to a macromolecule is here formally decomposed into the (effective) energy of interaction, reorganization energy of the ligand and the macromolecule, conformational entropy change of the ligand and the macromolecule, and translational and rotational entropy loss of the ligand. Molecular dynamics simulations with implicit solvation are used to evaluate these contributions in the binding of biotin, biotin analogs, and two peptides to avidin and streptavidin. We find that the largest contribution opposing binding is the protein reorganization energy, which is calculated to be from 10 to 30 kcal/mol for the ligands considered here. The ligand reorganization energy is also significant for flexible ligands. The translational/rotational entropy is 4.5–6 kcal/mol at 1 M standard state and room temperature. The calculated binding free energies are in the correct range, but the large statistical uncertainty in the protein reorganization energy precludes precise predictions. For some complexes, the simulations show multiple binding modes, different from the one observed in the crystal structure. This finding is probably due to deficiencies in the force field but may also reflect considerable ligand flexibility. Proteins 2002;47:194–208. © 2002 Wiley‐Liss, Inc.