Epidemiological studies have indicated that malnutrition during early life may programme chronic degenerative disease in adulthood. In an animal model of fetal malnutrition, rats received an isoenergetic, low-protein (LP) diet during gestation. This reduced fetal beta-cell proliferation and insulin secretion. Supplementation during gestation with taurine prevented these alterations. Since proteases are involved in secretion and proliferation, we investigated which proteases were associated with these alterations and their restoration in fetal LP islets. Insulin secretion and proliferation of fetal control and LP islets exposed to different protease modulators were measured. Lactacystin and calpain inhibitor I, but not isovaleryl-L-carnitine, raised insulin secretion in control islets, indicating that proteasome and cysteinyl cathepsin(s), but not mu-calpain, are involved in fetal insulin secretion. Insulin secretion from LP islets responded normally to lactacystin but was insensitive to calpain inhibitor I, indicating a loss of cysteinyl cathepsin activity. Taurine supplementation prevented this by restoring the response to calpain inhibitor I. Control islet cell proliferation was reduced by calpain inhibitor I and raised by isovaleryl-L-carnitine, indicating an involvement of calpain. Calpain activity appeared to be lost in LP islets and not restored by taurine. Most modifications in the mRNA expression of cysteinyl cathepsins, calpains and calpastatin due to maternal protein restriction were consistent with reduced protease activity and were restored by taurine. Thus, maternal protein restriction affected cysteinyl cathepsins and the calpain-calpastatin system. Taurine normalised fetal LP insulin secretion by protecting cysteinyl cathepsin(s), but the restoration of LP islet cell proliferation by taurine did not implicate calpains.