Biological signaling pathways are underpinned by protein switches that sense and respond to molecular inputs. Inspired by nature, engineered protein switches have been designed to directly transduce analyte binding into a quantitative signal in a simple, wash-free, homogeneous assay format. As such, they offer great potential to underpin point-of-need diagnostics that are needed across broad sectors to improve access, costs, and speed compared to laboratory assays. Despite this, protein switch assays are not yet in routine diagnostic use, and a number of barriers to uptake must be overcome to realize this potential. Here, we review the opportunities and challenges in engineering protein switches for rapid diagnostic tests. We evaluate how their design, comprising a recognition element, reporter, and switching mechanism, relates to performance and identify areas for improvement to guide further optimization. Recent modular switches that enable new analytes to be targeted without redesign are crucial to ensure robust and efficient development processes. The importance of translational steps toward practical implementation, including integration into a user-friendly device and thorough assay validation, is also discussed.