A method and electrosurgical system for optically detecting blood and controlling an electrosurgical generator are provided. An optical blood detection system is used for optically detecting blood and may be included as an integral part of the overall electrosurgical system's circuitry, or may be designed as a separate unit that connects to, and controls, an electrosurgical generator. The optical blood detection system may be embodied through a variety of analog, digital and/or optical circuit components or arrangements, including software running on computational and memory circuitry. The optical blood detection system controls the output mode and energy of the electrosurgical generator in accordance with the amount of blood detected.