Determination of high resolution, three dimensional structures of transmembrane proteins has, in many cases, only been accomplished through the use of stabilized variant forms of the proteins being studied. For the important G protein coupled receptor superfamily this has most often been achieved by inserting a stable soluble protein, such as T4 lysozyme (T4L) in an internal loop of a receptor. However, creation of such fusion proteins generally results in loss of the ability of receptors to activate their cognate cytoplasmic G proteins. Furthermore, the criteria for designing fusions that minimally perturb receptor structure are not well established. We describe here a method for creating a library of receptor variants containing T4L inserted into an internal loop at varying positions and as replacements for varying amounts of the original receptor sequence. We also describe methods for screening for variants displaying maximal expression levels, ligand binding capacity, and signaling function. When applied to the yeast α-factor receptor, Ste2p, this approach allowed recovery of well-expressed receptor variants containing internally fused T4L that retained nearly normal signaling function. The approach we describe can be readily adapted to creation of stabilized fusions of other transmembrane proteins expressed in yeast or other expression systems.