Methods to directly inhibit gene expression using small molecules hold promise for the development of new therapeutics targeting proteins that have evaded previous attempts at drug discovery. Among these, small molecules including the drug-like compound PF-06446846 (PF846) selectively inhibit the synthesis of specific proteins, by stalling translation elongation. These molecules also inhibit translation termination by an unknown mechanism. Using cryo-electron microscopy (cryo-EM) and biochemical approaches, we show that PF846 inhibits translation termination by arresting the nascent chain (NC) in the ribosome exit tunnel. The arrested NC adopts a compact α-helical conformation that induces 28 S rRNA nucleotide rearrangements that suppress the peptidyl transferase center (PTC) catalytic activity stimulated by eukaryotic release factor 1 (eRF1). These data support a mechanism of action for a small molecule targeting translation that suppresses peptidyl-tRNA hydrolysis promoted by eRF1, revealing principles of eukaryotic translation termination and laying the foundation for new therapeutic strategies.