Human cathepsin K is a recently identified protein with high primary sequence homology to members of the papain cysteine protease superfamily including cathepsins S, L, and B and is selectively expressed in osteoclasts (Drake, F.H., Dodds, R., James I., Connor J., Debouck, C., Richardson, S., Lee, E., Rieman, D., Barthlow, R., Hastings, G., and Gowen, M. (1996) J. Biol., Chem. 271, 12511-12516). To characterize its catalytic properties, cathepsin K has been expressed in baculovirus-infected SF21 cells and the soluble recombinant protein isolated from growth media was purified. Purified protein includes an inhibitory pro-leader sequence common to this family of protease. Conditions for enzyme activation upon removal of the pro-sequence have been identified. Fluorogenic peptides have been identified as substrates for mature cathepsin K. In addition, two protein components of bone matrix, collagen and osteonectin, have been shown to be substrates of the activated protease. Cathepsin K is inhibited by E-64 and leupeptin, but not for by pepstatin, EDTA, phenylmethylsulfonyl fluoride, or phenanthroline, consistent with its classification within the cysteine protease class. Leupeptin has been characterized as a slow binding inhibitor of cathepsin K (kobs/[I] = 273,000 m(-1).s(-1)). Cathepsin K may represent the elusive protease implicated in degradation of protein matrix during bone resorption and represents a novel molecular target in treatment of disease states associated with excessive bone loss such as osteoporosis.