Hybridization-induced conformational changes have been successfully used in biosensors for the transduction of DNA-binding events into readily observable optical or electronic signals. Similar signal transduction has not, however, proven of equal utility in proteinbased biosensors. The discrepancy arises because, unlike ssDNA, most proteins do not undergo significant conformational changes upon ligand binding. Here, we describe a solution to this problem. We show that an arbitrarily selected, normally well folded protein can be rationally engineered such that it undergoes ligand-induced folding. The engineered protein responds rapidly (milliseconds) and selectively to its target, and it couples recognition with the largest possible conformational change: folding. These traits suggest that ligand-induced folding could serve as an ideal signaltransduction mechanism. Consistent with this claim, we demonstrate a label-free optical biosensor based on the effect that is sufficiently selective to detect its target even in complex, contaminant-ridden samples such as blood serum.fluorescence ͉ molecular beacon ͉ natively unfolded ͉ quenching