Coupling the activities of normally disparate proteins into one functional unit has significant potential in terms of constructing novel switching components for synthetic biology or as biosensors. It also provides a means of investigating the basis behind transmission of conformation events between remote sites that is integral to many biological processes, including allostery. Here we describe how the structures and functions of two normally unlinked proteins, namely, the heme binding capability of cytochrome b562 and the antibiotic degrading β-lactamase activity of TEM, have been coupled using a directed evolution domain insertion approach. The important small biomolecule heme directly modulates in vivo and in vitro the β-lactamase activity of selected integral fusion proteins. The presence of heme decreased the concentration of ampicillin tolerated by Escherichia coli and the level of in vitro hydrolysis of nitrocefin by up to 2 orders of magnitude. Variants with the largest switching magnitudes contained insertions at second-shell sites that abut key catalytic residues. Spectrophotometry confirmed that heme bound to the integral fusion proteins in a manner similar to that of cytochrome b562. Circular dichroism suggested that only subtle structural changes rather than gross folding−unfolding events were responsible for modulating β-lactamase activity, and size exclusion chromatography confirmed that the integral fusion proteins remained monomeric in both the apo and holo forms. Thus, by sampling a variety of insertion positions and linker sequences, we are able to couple the functions of two unrelated proteins by domain insertion.