Two allosteric enzymes have been created by the covalent linkage of non-interacting, monomeric proteins with the prerequisite effector-binding and catalytic functionalities, respectively. This was achieved through a combinatorial process called random domain insertion. The fragment of the TEM-1 beta-lactamase gene coding for the mature protein lacking its signal sequence was randomly inserted into the Escherichia coli maltose-binding protein (MBP) gene to create a domain insertion library. This library's diversity derived both from the site of insertion and from a distribution of tandem duplications or deletions of a portion of the MBP gene at the insertion site. From a library of approximately 2 x 10(4) in-frame fusions, approximately 800 library members conferred a phenotype to E.coli cells that was consistent with the presence of bifunctional fusions that could hydrolyze ampicillin and transport maltose in E.coli. Partial screening of this bifunctional sublibrary resulted in the identification of two enzymes in which the presence of maltose modulated the rate of nitrocefin hydrolysis. For one of these enzymes, the presence of maltose increased k(cat) by 70% and k(cat)/K(m) by 80% and resulted in kinetic parameters that were almost identical to TEM-1 beta-lactamase. Such an increase in activity was only observed with maltooligosaccharides whose binding to MBP is known to induce a conformational change. Modulation of the rate of nitrocefin hydrolysis could be detected at maltose concentrations less than 1 microM. Intrinsic protein fluorescence studies were consistent with a conformational change being responsible for the modulation of activity.