We constructed a novel optical indicator for chloride ions by fusing the chloride-sensitive yellow fluorescent protein with the chloride-insensitive cyan fluorescent protein. The ratio of FRET-dependent emission of these fluorophores varied in proportion to the concentration of Cl− and was used to measure intracellular chloride concentration ([Cl−]i) in cultured hippocampal neurons. [Cl−]i decreased during neuronal development, consistent with the shift from excitation to inhibition during maturation of GABAergic synapses. Focal activation of GABAA receptors caused large changes in [Cl−]i that could underlie use-dependent depression of GABA-dependent synaptic transmission. GABA-induced changes in somatic [Cl−]i spread into dendrites, suggesting that [Cl−]i can signal the location of synaptic activity. This genetically encoded indicator will permit new approaches ranging from high-throughput drug screening to direct recordings of synaptic Cl− signals in vivo.