The FlowLight has the potential to change office culture by making people more respectful of each other's time, according to an early trial.
Inventor Dr Thomas Fritz, from the University of British Columbia, Canada, came up with the idea while working with a robotics company whose employees resorted to putting road safety cones on their desks as a "keep away" signal.
"The light is like displaying your Skype status - it tells your colleagues whether you're busy or open for a chat," said Dr Fritz, who began the project at the University of Zurich in Switzerland.
"When you're interrupted, it can take a long time to get back into your work and it's more likely you'll make mistakes."
FlowLight monitors a person's working pattern from keyboard and mouse activity. When it senses that someone is focused on a task, the green light turns to red, letting everyone else know this is not a good time to talk.
The gadget was tested on 450 members of staff at ABB Inc, the international robotic engineering company whose computer programmers had adopted the traffic cone system.
Employees using the light reported fewer interruptions and some were motivated to finish their work faster, said Dr Fritz, who developed FlowLight with the help of ABB researchers.
People became more aware of when they could interrupt colleagues, and when the time was not right.
To avoid employees competing or feeling guilty for "slacking", the device is designed to turn red for a maximum amount of time each day no matter how hard someone works.
Dr Fritz is now testing a more advanced version of the FlowLight with companies in Vancouver, Canada, to see if it can be improved using sensors to detect heart rate, pupil dilation, eye blinks and even brainwave activity.