This dissertation covers a broad range of research topics all towards the ultimate goal establishing of a novel type of biosensor in which the biocompatible membrane structure reconstituted with functional transmembrane proteins is utilized as the sensing element. It focuses on 1) examining the activity of a model transmembrane protein, bovine rhodopsin (Rho) when reconstituted into stabilized lipid membranes and 2) the instrumentation of a novel type of optical spectroscopy, plasmon waveguide resonance (PWR), which is a surface sensitive technique and its application in sensing biological events.Lipid membrane play crucial roles in cell function. Their biophysical properties affect the activity of a large amount of transmembrane receptors. They are great candidates for biosensing/ biomedical coating. However, the intrinsic instability of natural or fluid membranes prevents them to be used in a device. Studies have been done to show indirect evidence that the activity of Rho maybe maintained in polymerized membrane composed of bis-SorbPC lipids. The activity of Rho reconstituted into vesicular membranes comprised of various lipids was studied by a more direct technique, UV-Vis. It was found Rho activity was maintained to 66% of that in natural Egg PC lipid in the mixture of Egg PC:(poly)bis-SorbPC (1:1 mol:mol) as opposed to minimal values in 100 % (poly)lipids.A new type of spectral PWR was developed. The working concept, technical characterization and comparisons with similar techniques were discussed and compared in this work. A modified version of angular PWR in which lipid bilayers were formed by vesicle fusion was also developed. This method excludes possible effects from a high boiling point organic solvent on either the lipid bilayer itself or the membrane proteins associated with it. A calculating program NphaseAll for PWR was developed to do predictions of waveguide properties can be made to provide guidance for waveguide design. Theoretical calculations were done for PWR and experimental results were compared with the theoretical predictions.PWR was used to detect the formation of a biological lipid membrane, the association of alpha synuclein with membranes and the binding activity of human melanarcortin to its ligands in fluid and polymerized/dried membranes.