The biological role of a natural inhibitor of cysteine peptidases (designated ICP) of Leishmania has been investigated by genetic manipulation of the parasite. Null mutants grew normally in vitro, were as infective to macrophages in vitro as wild-type parasites, but had reduced infectivity to mice. Mutants re-expressing ICP from a single gene gave partial restoration of virulence in vivo, whereas mutants overexpressing ICP secreted the inhibitor and showed markedly reduced virulence in mice. Promastigotes of the null mutants had similar cysteine peptidase activities as the wild-type parasites, suggesting that ICP is not required for the expression or processing of the enzymes. The only proteins found to bind to ICP in promastigote cell lysates were fully processed forms of CPA and CPB, showing that ICP does not bind in abundance either to zymogens of the cysteine peptidases or other leishmanial proteins. However, only a small proportion of ICP colocalized with CPA and CPB in the promastigote (in the endoplasmic reticulum and Golgi) and the majority of ICP resided in vesicles that are apparently distinct from endosomes and the multivesicular tubule (MVT)-lysosome. These data suggest that ICP has a role other than modulation of the activity of the parasite's own cysteine peptidases and their normal trafficking to the MVT-lysosome via the flagellar pocket. The finding that ICP partially colocalized with an endocytosed cysteine peptidase leads us to postulate that ICP has a role in protection of the parasite against the hydrolytic environment of the sandfly gut and/or the parasitophorous vacuole of host macrophages.