Squaraine dyes are bright deep-red fluorescent molecules that have a donor-acceptor-donor structure resulting in an electron deficient aromatic core that is susceptible to nucleophilic attack. Encapsulation of the dye inside a tetralactam macrocycle forms a squaraine rotaxane which protects the core from nucleophiles and also prevents fluorescence quenching by self-aggregation. This dissertation focuses on the development, syntheses, and application of water-soluble squaraine rotaxanes. The chemical and photochemical stability of water-soluble squaraine rotaxanes with four large stopper groups attached to the dye core was found to be vastly superior to that of squaraine rotaxanes with three and two large stopper groups. Squaraine rotaxanes were functionalized with ionic groups and utilized as non-targeted tracers for in vivo imaging studies, including monitoring disruption of the blood-brain-barrier. A variety of squaraine rotaxanes with potential targeting ability were prepared and tested for application in cell death imaging, cationic cell entry, and bio-conjugation. Bone targeted squaraine rotaxanes with non-bisphosphonate groups were found to be excellent in vivo imaging agents and their bone targeting ability was comparable to that of traditional bisphosphonate probes.