Solute-binding proteins (SBPs) have evolved to balance the demands of ligand affinity, thermostability, and conformational change to accomplish diverse functions in small molecule transport, sensing, and chemotaxis. Although the ligand-induced conformational changes that occur in SBPs make them useful components in biosensors, they are challenging targets for protein engineering and design. Here, we have engineered a d-alanine-specific SBP into a fluorescence biosensor with specificity for the signaling molecule d-serine (D-serFS). This was achieved through binding site and remote mutations that improved affinity (KD = 6.7 ± 0.5 μM), specificity (40-fold increase vs glycine), thermostability (Tm = 79 °C), and dynamic range (∼14%). This sensor allowed measurement of physiologically relevant changes in d-serine concentration using two-photon excitation fluorescence microscopy in rat brain hippocampal slices. This work illustrates the functional trade-offs between protein dynamics, ligand affinity, and thermostability and how these must be balanced to achieve desirable activities in the engineering of complex, dynamic proteins.