Genetic diseases are often caused by nonsense mutations, but only one TRID (translation readthrough inducing drug), ataluren, has been approved for clinical use. Ataluren inhibits release factor complex (RFC) termination activity, while not affecting productive binding of near-cognate ternary complex (TC, aa-tRNA.eEF1A.GTP). Here we use photoaffinity labeling to identify two sites of ataluren binding within rRNA, proximal to the decoding center (DC) and the peptidyl transfer center (PTC) of the ribosome, which are directly responsible for ataluren inhibition of termination activity. A third site, within the RFC, has as yet unclear functional consequences. Using single molecule and ensemble fluorescence assays we also demonstrate that termination proceeds via rapid RFC-dependent hydrolysis of peptidyl-tRNA followed by slow release of peptide and tRNA from the ribosome. Ataluren is an apparent competitive inhibitor of productive RFC binding, acting at or before the hydrolysis step. We conclude that designing more potent TRIDs which retain ataluren’s low toxicity should target areas of the RFC binding site proximal to the DC and PTC which do not overlap the TC binding site.