To improve the pharmacological profile of tumor necrosis factor alpha (TNF-α), we have synthesized a new PEGylated prodrug, PEG-vcTNF-α, using a cathepsin B-sensitive dipeptide (valine-citrulline, vc) to link branched PEG and TNF-α. PEG-modified TNF-α without the dipeptide linker (PEG-TNF-α) and unconjugated TNF-α were also tested as controls. It was found for the first time that TNF-α released from PEG-vcTNF-α was specifically dependent on the presence of cathepsin B. PEG-vcTNF-α induced higher cytotoxicity and greater apoptosis against L929 murine fibrosarcoma cells than PEG-TNF-α. Reversal of these effects by a cathepsin-B inhibitor confirmed that these effects were mediated by cathepsin B-specific release of TNF-α. In vivo pharmacokinetics studies demonstrated that the plasma stability of PEG-vcTNF-α was significantly increased compared to TNF-α. Finally, the improved anticancer efficacy of PEG-vcTNF-α and the distinct activities among the three formulations confirmed the positive contribution of both PEGylation and the dipeptide linkage to the improved drug-like properties of PEG-vcTNF-α. The results here indicate that linking proteins and PEG via the cathepsin B-sensitive dipeptide may be a promising strategy for developing protein therapeutics.