Local frustration, the existence of mutually competing interactions, may explain why some proteins are dynamic when others are rigid. More specifically, frustration is thought to play a key role in biomolecular recognition while it can also underpin the flexibility of binding sites. Here we show how a seemingly small chemical modification, the oxidation of two thiols to form a disulfide bond, during the biological function of the N-terminal domain of the bacterial oxidoreductase DsbD (nDsbD), introduces frustration. In oxidised nDsbD, local frustration disrupts the packing of the protective cap loop region against the active site of the protein allowing loop opening and exposure of the active-site cysteines even in the absence of any interaction partners. By contrast, in reduced nDsbD, lacking a disulfide bond, the cap loop is rigid, always shielding the active-site cysteines and protecting them from the otherwise oxidising environment of the bacterial periplasm. Our results point towards an intricate coupling between the dynamics of the active-site cysteines and those of the cap loop, which shapes the protein-protein association reactions of nDsbD resulting in optimised protein function.