We describe a novel biosensor system for reporting proximity between cell surface proteins in live cultured cells. The biosensor takes advantage of recently developed fluorogen-activating proteins (FAPs) that display fluorescence only when bound to otherwise-nonfluorescent fluorogen molecules. To demonstrate feasibility for the approach, two recombinant rapamycin-binding proteins were expressed as single-pass plasma membrane proteins in HeLa cells; one of the proteins (scAvd- FRB) carried an extracellular avidin tag; the other (HL1-TO1-FKBP) carried an extracellular FAP. Cells were incubated with a membrane-impermeable bivalent ligand (biotin-PEG2000-DIR) consisting of biotin joined to a dimethyl-indole red (DIR) fluorogen by a polyethylene glycol linker, thus tethering the fluorogen to the scAvd-FRB fusion protein. Addition of rapamycin, which promotes FKBP-FRB dimerization and thereby brings the FAP in close proximity to the tethered fluorogen, led to a significant increase in DIR fluorescence. We call the new proximity assay TEFLA, for tethered fluorogen assay.