Every year in Europe more than 500 thousand injuries that involve the anterior cruciate ligament (ACL) are diagnosed. The ACL is one of the main restraints within the human knee, focused on stabilizing the joint and controlling the relative movement between the tibia and femur under mechanical stress (i.e., laxity). Ligament laxity measurement is clinically valuable for diagnosing ACL injury and comparing possible outcomes of surgical procedures. In general, knee laxity assessment is manually performed and provides information to clinicians which is mainly subjective. Only recently quantitative assessment of knee laxity through instrumental approaches has been introduced and become a fundamental asset in clinical practice. However, the current solutions provide only partial information about either static or dynamic laxity. To support a multiparametric approach using a single device, an innovative smart knee brace for knee laxity evaluation was developed. Equipped with stretchable strain sensors and inertial measurement units (IMUs), the wearable system was designed to provide quantitative information concerning the drawer, Lachman, and pivot shift tests. We specifically characterized IMUs by using a reference sensor. Applying the Bland-Altman method, the limit of agreement was found to be less than 0.06 m/s for the accelerometer, 0.06 rad/s for the gyroscope and 0.08 μT for the magnetometer. By using an appropriate characterizing setup, the average gauge factor of the three strain sensors was 2.169. Finally, we realized a pilot study to compare the outcomes with a marker-based optoelectronic stereophotogrammetric system to verify the validity of the designed system. The preliminary findings for the capability of the system to discriminate possible ACL lesions are encouraging; in fact, the smart brace could be an effective support for an objective and quantitative diagnosis of ACL tear by supporting the simultaneous assessment of both rotational and translational laxity. To obtain reliable information about the real effectiveness of the system, further clinical validation is necessary.