Graphene oxide (GO) is an emerging luminescent nanomaterial with photostable and unique photoluminescence (PL) in the visible and near-infrared region. Herein, a GO PL-based optical biosensor consisting of a luminescent GO donor covalently linked with a peptide-quencher complex is reported for the simple, rapid, and sensitive detection of proteases. To this end, the quenching efficiency of various candidate quenchers of GO fluorescence, such as metalloprotoporphyrins and QXL(570), are examined and their quenching mechanisms investigated. A fluorescence resonance energy transfer-based quencher, QXL(570), is found to be much more effective for quenching the intrinsic fluorescence of GO than other charge transfer-based quenchers. The designed GO-peptide-QXL system is then able to sensitively detect specific proteases-chymotrypsin and matrix metalloproteinase-2-via a "turn-on" response of quenched GO fluorescence after proteolytic cleavage of the quencher. Finally, the GO-peptide-QXL hybrid successfully detects MMP-2 secreted from living cells-human hepatocytes HepG2-with high sensitivity.