Pseudomonas protegens is a biocontrol rhizobacterium with a plant-beneficial and an insect pathogenic lifestyle, but it is not understood how the organism switches between the two states. Here, we focus on understanding the function and possible evolution of a molecular sensor that enables P. protegens to detect the insect environment and produce a potent insecticidal toxin specifically during insect infection but not on roots. By using quantitative single cell microscopy and mutant analysis, we provide evidence that the sensor histidine kinase FitF is a key regulator of insecticidal toxin production. Our experimental data and bioinformatic analyses indicate that FitF shares a sensing domain with DctB, a histidine kinase regulating carbon uptake in Proteobacteria. This suggested that FitF has acquired its specificity through domain shuffling from a common ancestor. We constructed a chimeric DctB-FitF protein and showed that it is indeed functional in regulating toxin expression in P. protegens. The shuffling event and subsequent adaptive modifications of the recruited sensor domain were critical for the microorganism to express its potent insect toxin in the observed host-specific manner. Inhibition of the FitF sensor during root colonization could explain the mechanism by which P. protegens differentiates between the plant and insect host. Our study establishes FitF of P. protegens as a prime model for molecular evolution of sensor proteins and bacterial pathogenicity.