In this paper we present a method for classifying proteins into families using sparse Markov transducers (SMTs). Sparse Markov transducers, similar to probabilistic suffix trees, estimate a probability distribution conditioned on an input sequence. SMTs generalize probabilistic suffix trees by allowing for wild-cards in the conditioning sequences. Because substitutions of amino acids are common in protein families, incorporating wildcards into the model significantly improves classification performance. We present two models for building protein family classifiers using SMTs. We also present efficient data structures to improve the memory usage of the models. We evaluate SMTs by building protein family classifiers using the Pfam database and compare our results to previously published results.