In the malaria parasite Plasmodium falciparum, erythrocytic trophozoites hydrolyse haemoglobin to provide amino acids for parasite protein synthesis. Cysteine protease inhibitors block parasite haemoglobin hydrolysis and development, indicating that cysteine proteases are required for these processes. Three papain-family cysteine protease sequences have been identified in the P. falciparum genome, but the specific roles of their gene products and other plasmodial proteases in haemoglobin hydrolysis are uncertain. Falcipain-2 was recently identified as a principal trophozoite cysteine protease and potential drug target. The present study characterizes the related P. falciparum cysteine protease falcipain-3. As is the case with falcipain-2, falcipain-3 is expressed by trophozoites and appears to be located within the food vacuole, the site of haemoglobin hydrolysis. Both proteases require a reducing environment and acidic pH for optimal activity, and both prefer peptide substrates with leucine at the P(2) position. The proteases differ, however, in that falcipain-3 undergoes efficient processing to an active form only at acidic pH, is more active and stable at acidic pH, and has much lower specific activity against typical papain-family peptide substrates, but has greater activity against native haemoglobin. Thus falcipain-3 is a second P. falciparum haemoglobinase that is particularly suited for the hydrolysis of native haemoglobin in the acidic food vacuole. The redundancy of cysteine proteases may offer optimized hydrolysis of both native haemoglobin and globin peptides. Consideration of both proteases will be necessary to evaluate cysteine protease inhibitors as antimalarial drugs.