Bacteria are an enormous and largely untapped reservoir of biosensing proteins. We describe an approach to identify and isolate bacterial allosteric transcription factors (aTFs) that recognize a target analyte and to develop these TFs into biosensor devices. Our approach utilizes a combination of genomic screens and functional assays to identify and isolate biosensing TFs, and a quantum-dot Förster Resonance Energy Transfer (FRET) strategy for transducing analyte recognition into real-time quantitative measurements. We use this approach to identify a progesterone-sensing bacterial aTF and to develop this TF into an optical sensor for progesterone. The sensor detects progesterone in artificial urine with sufficient sensitivity and specificity for clinical use, while being compatible with an inexpensive and portable electronic reader for point-of-care applications. Our results provide proof-of-concept for a paradigm of microbially-derived biosensors adaptable to inexpensive, real-time sensor devices.