Diagnosis plays a very crucial role in medicine and health care, which makes biosensors extremely important in modern technological context. Till date, various types of biosensors have been developed that are capable of detecting a wide range of biologically important species with great sensitivity and selectivity. However, most of these sensing units require highly sophisticated instrumentation and often lack the desired portability. Liquid crystal (LC) droplets, on the other hand, are a new type of functional material that are finding increasing research attention as a new sensing unit due to their tunable optical property, high surface area, portability and cost-effectiveness. In this dissertation, functionalized LC droplets for biosensing at aqueous-LC interface are highlighted. Chemically functionalized LC droplets dispersed in aqueous solution were prepared by the self-assembly of amphiphilic molecules at the aqueous/LC interface. These functionalized LC droplets showed a well-defined director of configuration and a specific optical pattern when observed with a polarizing light microscope. It was discovered that the interaction of chemically functionalized LC droplets with an analyte triggers transition of the director of configuration of the LC within the droplets, providing a simple and unique optical sign for the detection of the analyte. Moreover, the director of configuration transition happened in a concentration dependent manner, allowing both qualitative and quantitative detection of the analyte. The sensitivity of chemically functionalized LC droplets depends not only on the nature of amphiphilic molecules but also the size and number of the droplets. iv The dissertation essentially deals with the application of these chemically functionalized LC droplets in detecting several biologically important species. It was observed that the adsorption of charged macromolecules (dendrimers, proteins, and viruses) on polyelectrolyte functionalized LC droplets triggered a bipolar-to-radial configuration transition based on the polar verses nonpolar interaction. By using a simple optical microscope, microgram per milliliter concentrations of bovine serum albumin, cowpea mosaic virus, and tobacco mosaic virus could be detected in aqueous solution. The detection limit of Mastoparan X polypeptide decorated LC droplets in detecting E. coli could reach to approximately 10 bacteria per milliliter. In this case, the high affinity of the polypeptide towards the bacterial causes the former to detach from the LC droplets, triggering the director of configuration transition of the LC inside the droplets. Finally, surfactant decorated LC droplets were used to detect lithocholic acid (LCA), a toxic bile acid used as a specific biomarker for colon cancers. In this case, the director of configuration transition of the LC inside the droplets is a result of the replacement of the surfactant from the aqueous/LC interface by LCA. The microgram per milliliter concentration of LCA, a clinically significant concentration, could be easily detected by changing the length of surfactants. These studies highlight the novel use of surface functionalized LC droplets to detect biologically important species. Due to their tunable optical property, coupled with high surface area and portability, surface functionalized LC droplets have great potentials in the design of next generation biosensors