In addition to their degradative role in protein turnover, proteases play a key role as positive or negative regulators of signal transduction pathways and therefore their dysregulation contributes to many disease states. Regulatory roles of proteases include their hormone-like role in triggering G protein-coupled signaling (Protease-Activated-Receptors); their role in shedding of ligands such as EGF, Notch and Fas; and their role in signaling events that lead to apoptotic cell death. Dysregulated activation of apoptosis by the caspase family of proteases has been linked to diseases such as cancer, autoimmunity and inflammation. In an effort to better understand the role of proteases in health and disease, a luciferase biosensor is described which can quantitatively report proteolytic activity in live cells and mouse models. The biosensor, hereafter referred to as GloSensor Caspase 3/7 has a robust signal to noise (50-100 fold) and dynamic range such that it can be used to screen for pharmacologically active compounds in high throughput campaigns as well as to study cell signaling in rare cell populations such as isolated cancer stem cells. The biosensor can also be used in the context of genetically engineered mouse models of human disease wherein conditional expression using the Cre/loxP technology can be implemented to investigate the role of a specific protease in living subjects. While the regulation of apoptosis by caspase's was used as an example in these studies, biosensors to study additional proteases involved in the regulation of normal and pathological cellular processes can be designed using the concepts presented herein.