NanoFAST is a fluorogen-activating protein and can be considered one of the smallest encodable fluorescent tags. Being a shortened variant of another fluorescent tag, FAST, nanoFAST works nicely only with one out of all known FAST ligands. This substantially limits the applicability of this protein. To find the reason for such a behavior, we investigated the spatial structure and dynamics of nanoFAST, both in the apo state and in the complex with its fluorogen molecule, using the solution NMR spectroscopy. We showed that the truncation of FAST did not affect the structure of the remaining part of the protein. Our data suggest that the deleted N-terminus of FAST destabilizes the C-terminal domain in the apo state. While it does not contact the fluorogen directly, it serves as a free energy reservoir that enhances the ligand binding propensity of the protein. The structure of nanoFAST/HBR-DOM2 complex reveals the atomistic details of nanoFAST interactions with the rhodanine-based ligands and explains the ligand specificity. NanoFAST selects ligands with the lowest dissociation constants, 2,5-disubstituted 4-hydroxybenzyldienerhodainines, which allow the non-canonical intermolecular CH-N hydrogen bonding and provide the optimal packing of the ligand within the hydrophobic cavity of the protein.