Mercury (Hg) is one of the main water contaminants worldwide. In this study, we have developed both whole-cell and cell-free biosensors to detect Hg. Genetically modified plasmids containing the merR gene were used to design biosensors. Firefly luciferase (LucFF) and emerald green fluorescent protein (EmGFP) genes were separately introduced as a reporter. Both constructs showed a detection limit of 1 ppb (Hg) in and the cell-free system. We found that higher concentrations of Hg become detrimental to bacteria. This cytotoxic effect shows an anomalous result in high Hg concentrations. This was also observed in the cell-free system. We found that EmGFP fluorescence was decreased in the cell-free system because of a change in pH and quenching effect by Hg excess. Once the pH was adjusted to 7 and a chelating agent was used, the EmGFP fluorescence was partially restored. These adjustments can only be done in the cell-free system after the GFP expression and not in whole cells where their number has been decreased because of toxicity. Therefore, we suggest the use of the cell-free-system, which not only reduces the total experimental time but also allows us to perform these postexperimental adjustments to achieve higher sensitivity. We would also recommend to perform more measurements at a time with different dilution factors to bring down the Hg concentration within the measurable limits or to use some other chelating agents which can further reduce the excess Hg concentration.