We study optical spectra in high and low activity states of the faint, distant Seyfert 1 galaxy C16.16. A strong stellar population contribution to the continuum is observed, even in the high-state spectrum. The low- ionization emission lines show large equivalent widths. Narrow-line ratios are used to parameterize and investigate the physical conditions in the narrow-line region. Photoionization models with nitrogen depletion, ionization continuum typical of an active galactic nucleus (AGN), and an ionization parameter U = 10^-2.8^ reproduce the observed narrow lines. The AGN continuum shows a strong variation, while the Balmer lines vary moderately. The Balmer lines have a broad and asymmetric component with double-peaked structure. Using the profiles of emission lines originated in a relativistic circular disk, we successfully fit the observed broad Hα profile. This disk component shows no variation in the observations. A variable, intermediate-width (6000 km s^-1^) Balmer component is also found. These two components seem to arise by different processes.