A nanohybrid consisting of water-soluble thioglycolic acid (TGA)-capped CdTe nanocrystals (NCs) and methylene blue (MB) was designed as a label-free luminescent signaling platform for DNA. This sensing system was identified to operate under the photoinduced electron transfer (PET) mechanism in which MB is the electron acceptor and the binding site for the designated target molecule DNA. We showed that MB bound with TGA-capped CdTe NCs via strong electrostatic interactions resulted in an efficient quenching of the photoluminescence (PL) of NCs. Steady-state and time-resolved PL, and electron paramagnetic resonance (EPR) experiments established the quenching pathway of PET from the conduction band (CB) of NCs to the ground state of MB. In the presence of the target molecule DNA, the MB-quenched PL of NCs could be reversibly restored by double-stranded DNA as the PET pathway is blocked when MB is taken away from the NCs surface due to its intercalation into, and electrostatic interaction with, DNA. The platform was successfully applied for sensing DNA and signaling DNA hybridization by switching the PET process. Such a nanohybrid represents a robust PET luminescent nanosensor that is, in principle, applicable for other species by employing suitable electron acceptors as binding sites.