We describe a method of designing artificial sequences that resemble naturally occurring sequences in terms of their compatibility with a template structure and its functional constraints. The design procedure is a Monte Carlo simulation of amino acid substitution process. The selective fixation of substitutions is dictated by a simple scoring function derived from the template structure and a multiple alignment of its homologs. Designed sequences represent an enlargement of sequence space around native sequences. We show that the use of designed sequences improves the performance of profile-based homology detection. The difference in position-specific conservation between designed sequences and native sequences is helpful for prediction of functionally important residues. Our sequence selection criteria in evolutionary simulations introduce amino acid substitution rate variation among sites in a natural way, providing a better model to test phylogenetic methods. C omputational protein design aims to identify sequences compatible with a desired structure or fold (1-4). Most design methods involve detailed energy functions with explicit modeling of protein structure at the atomic level and apply effective search algorithms (5, 6). They facilitate understanding of the physical and chemical principles governing protein structure and folding (4). Protein design can also be used to probe the sequence space (7), which has been applied in fold recognition (8). This idea can be extended to profile-based similarity searches, which derive a scoring function based on a multiple sequence alignment. Designed sequences resembling naturally occurring sequences could potentially be used to improve sequence profile, leading to more powerful homology detection. Sequence design can also be used in studying protein function and evolution (9, 10), as it is often related to evolutionary simulations. It is generally assumed that amino acid changes follow a stochastic process over long periods of time, and the fixation of substitutions is under evolutionary pressure to preserve protein activity. Evolutionary simulations can be made more realistic if structural and functional constraints are taken into account in the substitution process.Knowledge-based approaches have been widely used to derive interaction potentials by statistical analysis of known protein structures (11,12). Such potentials are used in various sequence design methods as stability constraints. Functional information about a protein family is embedded in naturally occurring homologs as positional amino acid conservation. Sequence profile, such as the position-specific scoring matrix generated by PSI-BLAST (13), contains the positional conservation information. We attempt to introduce structural and functional constraints in sequence design by considering both pairwise interaction potentials and sequence conservation information.Recently, a simulation-based design method (Z-score model) was used to study the protein evolutionary process (10). Structurally similar sequen...