We describe the development of an enzyme assay inside picoliter microdroplets. The enzyme alkaline phosphatase is expressed in Escherichia coli cells and presented in the periplasm. Droplets act as discrete reactors which retain and localize any reaction product. The catalytic turnover of the substrate is measured in individual droplets by monitoring the fluorescence at several time points within the device and exhibits kinetic behavior similar to that observed in bulk solution. Studies on wild type and a mutant enzyme successfully demonstrated the feasibility of using microfluidic droplets to provide time-resolved kinetic measurements.