We report the facile fabrication of a self-reporting, highly sensitive and selective optical urea nanobiosensor using chitosan-g-polypyrrole (CHIT-g-PPy) nanomicelles as a sensing platform. Urease was immobilized on the spherical micellar surface to create an ultrasensitive self-reporting nanobiosystem for urea. The resulting nanostructures show monodisperse size distributions before and after enzyme loading. The critical micelle concentration of the enzyme-immobilized polymer nanostructure was measured to be 0.49 mg/L in phosphate buffer at pH 7.4. The nanobiosensor had a linear optical response to urea concentrations ranging from 0.01 to 30 mM with a response time of a few seconds. This promising approach provides a novel methodology for self-reporting bioassembly over nanostructure polymer micelles and furnishes the basis for fabrication of sensitive and efficient optical nanobiosensors.