We investigated the Acinetobacter baylyi gene ACIAD1960, known from previous work to be expressed during long-term stationary phase. The protein encoded by this gene had been annotated as a Conserved Hypothetical Protein, surrounded by putative tellurite resistance ("Ter") proteins. Sequence analysis suggested that the protein belongs to the DUF1796 putative papain-like protease family. Here, we show that the purified protein, subsequently named StiP, has cysteine protease activity. Deletion of stiP causes hypersensitivity to tellurite, altered population dynamics during long-term batch culture, and most strikingly, dramatic alteration of normal cell morphology. StiP and associated Ter proteins (the StiP-Ter cluster) are therefore important for regulating cell morphology, likely in response to oxidative damage or depletion of intracellular thiol pools, triggered artificially by tellurite exposure. Our finding has broad significance because while tellurite is an extremely rare compound in nature, oxidative damage, the need to maintain a particular balance of intracellular thiols, and the need to regulate cell morphology are ubiquitous.