Tau is a microtubule binding protein which plays an important role in physiological functions but it is also involved in the pathogenesis of Alzheimer's disease (AD) and related tauopathies. While insoluble and β-sheet containing tau neurofibrillary tangles have been the histopathological hallmark of these diseases, recent studies suggest that soluble tau oligomers, which are formed prior to fibrils, are the primary toxic species. Substantial efforts have been made to generate tau oligomers using purified recombinant protein strategies to study oligomer conformations as well as their toxicity. However, no specific toxic tau species has been identified to date, potentially due to the lack of cellular environment. Hence, there is a need for cell-based models for direct monitoring of tau oligomerization and aggregation. This review will summarize the recent advances in the cellular biosensor technology, with a focus on fluorescence resonance energy transfer (FRET), bimolecular fluorescence complementation (BiFC) and split luciferase complementation (SLC) approaches, to monitor formation of tau oligomers and aggregates in living cells. We will discuss the applications of the cellular biosensors in examining the heterogeneous tau conformational ensembles and factors affecting tau self-assembly, as well as detecting cell-to-cell propagation of tau pathology. We will also compare the advantages and limitations of each type of tau biosensors, and highlight their translational applications in biomarker development and therapeutic discovery.