Directed evolution has proved to be an effective strategy for improving or altering the activity of biomolecules for industrial, research and therapeutic applications. The evolution of proteins in the laboratory requires methods for generating genetic diversity and for identifying protein variants with desired properties. This Review describes some of the tools used to diversify genes, as well as informative examples of screening and selection methods that identify or isolate evolved proteins. We highlight recent cases in which directed evolution generated enzymatic activities and substrate specificities not known to exist in nature.