Engineered protein-based sensors of ligand binding have emerged as attractive tools for the discovery of therapeutic compounds through simple screening systems. We have previously shown that engineered chimeric enzymes, which combine the ligand-binding domains of nuclear hormone receptors with a highly sensitive thymidylate synthase reporter, yield simple sensors that report the presence of hormone-like compounds through changes in bacterial growth. This work describes an optimized estrogen sensor in Escherichia coli with extraordinary reliability in identifying diverse estrogenic compounds and in differentiating between their agonistic/antagonistic pharmacological effects. The ability of this system to assist the discovery of new estrogen-mimicking compounds was validated by screening a small compound library, which led to the identification of two structurally novel estrogen receptor modulators and the accurate prediction of their agonistic/antagonistic biocharacter in human cells. Strong evidence is presented here that the ability of our sensor to detect ligand binding and recognize pharmacologically critical properties arises from allosteric communication between the artificially combined protein domains, where different ligand-induced conformational changes in the receptor are transmitted to the catalytic domain and translated to distinct levels of enzymic efficiency. To the best of our knowledge, this is one of the first examples of an engineered enzyme with the ability to sense multiple receptor conformations and to be either activated or inactivated depending on the nature of the bound effector molecule. Because the proposed mechanism of ligand dependence is not specific to nuclear hormone receptors, we anticipate that our protein engineering strategy will be applicable to the construction of simple sensors for different classes of (therapeutic) binding proteins.