A novel signal amplification method based on methylene blue (MB) and nicking endonuclease (NEase) was developed for Hg2+ detection. Hairpin-shaped probe A (PA) contains a thiol group at the 5′ end and methylene blue (MB) tag at the 3′ end. A NEase recognition sequence was embedded into the loop portion of the PA. PA was firstly immobilized on the Au electrode by a self-assembly approach through Au–S interaction. In the presence of Hg2+, the loop of PA could hybridize with mismatched probe B through the stable T–Hg2+–T linkage, forming the nicking recognition site, and PA was opened. Then NEase discerned the recognition site and nicked PA. After the dissociation of PA fragments, MB-labeled pieces dissociated from the Au electrode surface. The released probe B and Hg2+ could be reused to initiate the next cycle and more electroactive indicators dissociated from the electrode surface, resulting in a significant signal decrease. Under optimum conditions, this assay achieved a detection limit of 8.7 × 10−11 M (S/N = 3) and discriminated other metal ions from Hg2+ with a high selectivity. Moreover, the biosensor was used for the detection of Hg2+ in tap water samples with satisfactory results.