Since detailed evaluation of specific transglutaminases (TGs) from various species requires identification of their substrate specificities, rapid substrate screening method by measurement of their relative activities is in great demand. Here, a novel evaluation method of TG activity was developed using two recombinant fluorescent proteins (FPs), that is, eYFP and DsRed, tagged with TG substrate peptides. By cross-linking the two FPs based on the tagged target peptide sequences at their C-terminus, the expression of co-transformed TG allows quenching of the yellow fluorescence intensities. It was shown that the degree of in vivo fluorescent quenching by the TG activity agrees well with its in vitro reaction data, suggesting that this system can be used to identify relative substrate specificity of TGs for target peptide sequences. Using this method, the lysine substrates of TGs from Bacillus species (BTG) were evaluated, and the newly selected pentapeptide, KTKTN showed almost the same reactivity with the well-known hexa-lysine (K6) substrate for BTG reaction. Biotechnol. Bioeng. 2013;110: 2865–2873. © 2013 Wiley Periodicals, Inc.