Protein kinases and phosphatases are organized into complex intracellular signaling networks designed to coordinate their activities in both space and time. In order to better understand the molecular mechanisms underlying the regulation of signal transduction networks, it is important to define the spatiotemporal dynamics of both protein kinases and phosphatases within their endogenous environment. Herein, we report the development of a genetically-encoded protein biosensor designed to specifically probe the activity of the Ca2+/calmodulin-dependent protein phosphatase, calcineurin. Our reporter design utilizes a phosphatase activity-dependent molecular switch based on the N-terminal regulatory domain of the nuclear factor of activated T-cells as a specific substrate of calcineurin, sandwiched between cyan fluorescent protein and yellow fluorescent protein. Using this reporter, calcineurin activity can be monitored as dephosphorylation-induced increases in fluorescence resonance energy transfer and can be simultaneously imaged with intracellular calcium dynamics. The successful design of a prototype phosphatase activity sensor lays a foundation for studying targeting and compartmentation of phosphatases.