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Biosensors incorporate a biological sensing element that converts a change in an immediate environment to signals conducive for processing. Biosensors have been implemented for a number of applications ranging from environmental pollutant detection to defense monitoring. Biosensors have two intriguing characteristics: (1) they have a naturally evolved selectivity to biological or biologically active analytes; and (2) biosensors have the capacity to respond to analytes in a physiologically relevant manner. In this paper, molecular biosensors, based on antibodies, enzymes, ion channels, or nucleic acids, are briefly reviewed. Moreover, cell-based biosensors are reviewed and discussed. Cell-based biosensors have been implemented using microorganisms, particularly for environmental monitoring of pollutants. Biosensors incorporating mammalian cells have a distinct advantage of responding in a manner that can offer insight into the physiological effect of an analyte. Several approaches for transduction of cellular signals are discussed: these approaches include measures of cell metabolism, impedance, intracellular potentials, and extracellular potentials. Among these approaches, networks of excitable cells cultured on microelectrode arrays are uniquely poised to provide rapid, functional classification of an analyte and ultimately constitute a potentially effective cell-based biosensor technology. Three challenges that constitute barriers to increased cell-based biosensor applications are presented: analytical methods, reproducibility, and cell sources. Possible future solutions to these challenges are discussed.