The involvement of cysteine proteinases in the degradation of soft connective tissue collagen was studied in cultured periosteal explants. Using cysteine proteinase inhibitors that were active intracellularly or extracellularly (Ep453 and Ep475, respectively), it was shown that over-all collagen degradation, as measured by the release of hydroxyproline, decreased significantly on inhibition of the intracellular pool of cysteine proteinases by Ep453. This inhibitor also induced an accumulation of intracellular fibrillar collagen in fibroblasts, indicating a decreased degradation of phagocytosed collagen. The extracellular inhibitor, Ep475, had minor or no effects. Histochemical analysis using a substrate for the cysteine proteinases cathepsins B and L revealed a high level of enzyme activity, which was completely blocked in explants preincubated with a selective intracellular inhibitor of cathepsin B, Ca074-Me. Moreover, the cathepsin B inhibitor strongly affected collagen degradation, decreasing the release of hydroxyproline and increasing the accumulation of phagocytosed collagen. These effects were comparable or slightly stronger than those found with the general intracellular inhibitor (Ep453). Taken together, these data strongly suggest that intracellular cysteine proteinases, in particular cathepsin B, play an important role in the digestion of soft connective tissue collagen.