Myriad new applications of proteases would be enabled by an ability to fine-tune substrate specificity and activity. Herein we present a general strategy for engineering protease selectivity and activity by capitalizing on sequestration of the protease to be engineered within the yeast endoplasmic reticulum (ER). A substrate fusion protein composed of yeast adhesion receptor subunit Aga2, selection and counterselection substrate sequences, multiple intervening epitope tag sequences, and a C-terminal ER retention sequence is coexpressed with a protease library. Cleavage of the substrate fusion protein by the protease eliminates the ER retention sequence, facilitating transport to the yeast surface. Yeast cells that display Aga2 fusions in which only the selection substrate is cleaved are isolated by multicolor FACS with fluorescently labeled antiepitope tag antibodies. Using this system, the Tobacco Etch Virus protease (TEV-P), which strongly prefers Gln at P1 of its canonical ENLYFQ↓S substrate, was engineered to recognize selectively Glu or His at P1. Kinetic analysis indicated an overall 5,000-fold and 1,100-fold change in selectivity, respectively, for the Glu- and His-specific TEV variants, both of which retained high catalytic turnover. Human granzyme K and the hepatitis C virus protease were also shown to be amenable to this unique approach. Further, by adjusting the signaling strategy to identify phosphorylated as opposed to cleaved sequences, this unique system was shown to be compatible with the human Abelson tyrosine kinase.