Molecular beacons are increasingly being used in many applications involving nucleic acid detection and quantification. The stem-loop structure of molecular beacons provides a competing reaction for probe-target hybridization that serves to increase probe specificity, which is particularly useful when single-base discrimination is desired. To fully realize the potential of molecular beacons, it is necessary to optimize their structure. Here we report a systematic study of the thermodynamic and kinetic parameters that describe the molecular beacon structure-function relationship. Both probe and stem lengths are shown to have a significant impact on the binding specificity and hybridization kinetic rates of molecular beacons. Specifically, molecular beacons with longer stem lengths have an improved ability to discriminate between targets over a broader range of temperatures. However, this is accompanied by a decrease in the rate of molecular beacon-target hybridization. Molecular beacons with longer probe lengths tend to have lower dissociation constants, increased kinetic rate constants, and decreased specificity. Molecular beacons with very short stems have a lower signal-to-background ratio than molecular beacons with longer stems. These features have significant implications for the design of molecular beacons for various applications.