Methods and compositions for detecting molecular interactions, particularly protein-protein interactions, are provided. The invention allows detection of such interactions in living cells or in vitro. Detection of molecular interactions in living cells is not limited to the nuclear compartment, but can be accomplished in the cytoplasm, cell surface, organelles, or between these entities. In one embodiment, the method utilizes novel compositions comprising fusion proteins between the molecules of interest and two or more inactive, weakly-complementing .beta.-galactosidase mutants. Association between the molecules of interest brings the complementing .beta.-galactosidase mutants into proximity so that complementation occurs and active .beta.-galactosidase is produced. The active .beta.-galactosidase may be detected by methods well-known in the art. Among the uses of the invention are the study of protein-protein interactions, functional genomics, agonist and antagonist screening and drug discovery.