We constructed a library of beta-lactamases by recombining three naturally occurring homologs (TEM-1, PSE-4, SED-1) that share 34-42% sequence identity. Most chimeras created by recombining such distantly related proteins are unfolded due to unfavorable side-chain interactions that destabilize the folded structure. To enhance the fraction of properly folded chimeras, we designed the library using SCHEMA, a structure-guided approach to choosing the least disruptive crossover locations. Recombination at seven selected crossover positions generated 6561 chimeric sequences that differ from their closest parent at an average of 66 positions. Of 553 unique characterized chimeras, 111 (20%) retained beta-lactamase activity; the library contains hundreds more novel beta-lactamases. The functional chimeras share as little as 70% sequence identity with any known sequence and are characterized by low SCHEMA disruption (E) compared to the average nonfunctional chimera. Furthermore, many nonfunctional chimeras with low E are readily rescued by low error-rate random mutagenesis or by the introduction of a known stabilizing mutation (TEM-1 M182T). These results show that structure-guided recombination effectively generates a family of diverse, folded proteins even when the parents exhibit only 34% sequence identity. Furthermore, the fraction of sequences that encode folded and functional proteins can be enhanced by utilizing previously stabilized parental sequences.