Novel biophysical tools allow the structural dynamics of proteins, and the regulation of such dynamics by binding partners, to be explored in unprecedented detail. Although this has provided critical insights into protein function, the means by which structural dynamics direct protein evolution remains poorly understood. Here, we investigated how proteins with a bilobed structure, composed of two related domains from the type-II periplasmic binding protein domain family, have undergone divergent evolution leading to modification of their structural dynamics and function. We performed a structural analysis of ~600 bilobed proteins with a common primordial structural core, which we complemented with biophysical studies to explore the structural dynamics of selected examples by single-molecule Foerster resonance energy transfer and Hydrogen-Deuterium exchange mass spectrometry. We show that evolutionary modifications of the structural core, largely at its termini, enables distinct structural dynamics, allowing the diversification of these proteins into transcription factors, enzymes, and extra-cytoplasmic transport-related proteins. Structural embellishments of the core created new interdomain interactions that stabilized structural states, reshaping the active site geometry, and ultimately, altered substrate specificity. Our findings reveal an as yet unrecognized mechanism for the emergence of functional promiscuity during long periods of protein evolution and are applicable to a large number of domain architectures.