Neurodegenerative diseases present a progressive loss of neuronal structure and function, leading to cell death and irrecoverable brain atrophy. Most have disease-modifying therapies, in part because the mechanisms of neurodegeneration are yet to be defined, preventing the development of targeted therapies. To overcome this, there is a need for tools that enable a quantitative assessment of how cellular mechanisms and diverse environmental conditions contribute to disease. One such tool is genetically encodable fluorescent biosensors (GEFBs), engineered constructs encoding proteins with novel functions capable of sensing spatiotemporal changes in specific pathways, enzyme functions, or metabolite levels. GEFB technology therefore presents a plethora of unique sensing capabilities that, when coupled with induced pluripotent stem cells (iPSCs), present a powerful tool for exploring disease mechanisms and identifying novel therapeutics. In this review, we discuss different GEFBs relevant to neurodegenerative disease and how they can be used with iPSCs to illuminate unresolved questions about causes and risks for neurodegenerative disease.