Single wall carbon nanotubes (SWCNTs) functionalized with (bio-)polymers such as DNA are soluble in water and sense analytes by analyte specific changes of their intrinsic fluorescence. Such SWCNT-based (bio-)sensors translate binding of a molecule (molecular recognition) into a measurable optical signal. This signal transduction is crucial for all types of molecular sensors to achieve high sensitivities. Although there is an increasing number of SWCNT-based sensors, there is yet no molecular understanding of the observed changes of the SWCNT’s fluorescence. Here, we report THz experiments that map changes of the local hydration of the solvated SWCNT upon binding of analytes such as the neurotransmitter dopamine or the vitamin riboflavin. The THz amplitude signal serve as a probe of the coupling of the charge fluctuations in the SWCNT to the charge fluctuation in the hydration layer. We find a linear (inverse) correlation between changes in THz amplitude and the intensity of the change in fluorescence induced by the analytes. Simulations show that the organic corona shapes the local water (which determines the exciton dynamics). Thus THz signals are a quantitative predictor for signal transduction strength and can be used as a guiding chemical design principle for optimizing fluorescent biosensors.