In order to elucidate the substrate specificity of the Sn subsites (n=1-3) of cathepsin B, its crystal structure inhibited by E64c [(+)-(2S,3S)-3-(1-[N-(3-methylbutyl)amino]-leucylcarbonyl)oxirane-2-carboxylic acid] was analyzed by the X-ray diffraction method. Iterative manual rebuilding and convenient conjugate refinement of structure decreased R- and free R-factors to 19.7% and to 23.9%, respectively, where 130 water molecules were included for the refinement using 14,759 independent reflections from 10 to 2.3 A resolution. The epoxy carbonyl carbon of E64c was covalently bonded to the Cys(29) S(gamma) atom and the remaining parts were located at Sn subsites (n=1-3). The substrate specificity of these subsites was characterized based on their interactions with the inhibitor. Base on these structural data, we developed a novel cathepsin B-specific noncovalent-type inhibitor, which may bind to S2'-S3. The molecular design of possessing structural elements of both CA074 and E64c, assisted by energy minimization and molecular dynamics (MD) simulation, may lead to a new lead noncovalent-type inhibitor.