Proteases play a pivotal role in regulating important physiological processes from food digestion to blood clotting. They are also important biomarkers for many diseases such as cancers. The importance of proteases has led to extensive efforts in the screening of proteases and their inhibitors as potential drug molecules. For example, human immunodeficiency virus (HIV) patients have been treated with HIV-1 protease inhibitors to prolong the life expectancy of patients. Such a close relationship between diseases and proteases provides a strong motivation for developing sensitive, selective, and robust protease assays and sensors, which can be exploited to discover new proteases and inhibitors. In this aspect, protease assays based on levels of proteolytic activities are more relevant than protease affinity assays such as immunoassays. In this review, recent developments of protease activity assays based on different detection principles are discussed and compared. For homogenous assays, fluorescence-based techniques are the most popular due to their high sensitivity and quantitative results. However, homogeneous assays have limited multiplex sensing capabilities. In contrast, heterogeneous assays can be employed to detect multiple proteases simultaneously, given the microarray technology that is already available. Among them, electrochemical methods, surface spectroscopy techniques, and enzyme-linked peptide protease assays are commonly used. Finally, recent developments in liquid crystal (LC)-based protease assays and their applications for detecting proteases and their inhibitors are discussed.