DNA- and RNA-templated chemical reactions can serve as a diagnostic means for the detection of nucleic acids. Reaction schemes that allow amplified detection are of high interest for polymerase chain reaction (PCR)-free DNA and RNA diagnosis. These reactions typically draw upon the catalytic activity of the template, which is able to trigger the conversion of many signaling molecules per template molecule. However, the design of reactive probes that allow both sensitive and selective nucleic acid detection is a challenge and requires insight into three major parameters: a) reactivity of functional groups involved, b) affinity of probes for the template, and c) the readout system. In this study we used peptide nucleic acid (PNA)-based probes to investigate in detail the signaling power and the selectivity of a transfer reaction derived from a native chemical ligation. We show that subtle variations of the thioesters involved had a tremendous impact on the sensitivity and selectivity of the reaction system. The results suggest that reactions at turnover conditions require low rates of non-templated reaction pathways to provide high target selectivity and sensitivity. On the other hand, very high rates of templated reactions should be avoided to allow mismatched probe-template complexes to dissociate prior to bond formation. Furthermore, the temperature dependence of the DNA-catalyzed transfer reaction was studied and provided insight into crucial strand-exchange processes. Further improvements of selective signaling were achieved through a new readout based on pyrene-transfer reactions. This method reduces background signals and enables significant increases in the signaling rates compared with previous fluorescence-based methods.