The hybrid voltage sensor (hVOS) combines membrane-targeted green fluorescent protein and the hydrophobic anion dipicrylamine (DPA) to provide a promising tool for optical recording of electrical activity from genetically defined populations of neurons. However, large fluorescence signals are obtained only at high DPA concentrations (>3 mum) that increase membrane capacitance to a level that suppresses neural activity. Here, we develop a quantitative model of the sensor to guide its optimization and achieved an approximate threefold increase in fractional fluorescence change at a lower DPA concentration of 2 mum. Using this optimized voltage reporter, we perform optical recordings of evoked activity in the Drosophila antennal lobe with millisecond temporal resolution but fail to detect action potentials, presumably because spike initiation and/or propagation are inhibited by the capacitive load added even at reduced DPA membrane densities. We evaluate strategies for potential further improvement of hVOS quantitatively and derive theoretical performance limits for optical voltage reporters in general.