The importance of regulating the cellular concentrations of the myristoylated alanine-rich C kinase substrate (MARCKS), a major cellular substrate of protein kinase C, is indicated by the fact that mice lacking MARCKS exhibit gross abnormalities of central nervous system development and die shortly after birth. We previously identified a novel means of regulating cellular MARCKS concentrations that involved a specific proteolytic cleavage of the protein and implicated a cysteine protease in this process (Spizz, G., and Blackshear, P. J. (1996) J. Biol. Chem. 271, 553-562). Here we show that p40, the carboxyl-terminal fragment resulting from this cleavage of MARCKS, was associated with the mitochondrial/lysosomal pellet fraction of human diploid fibroblasts and that its generation in cells was sensitive to treatment with NH 4 Cl. These data suggest the involvement of lysosomes in the generation and/or stability of p40. The MARCKS-cleaving enzyme (MCE) activity was peripherally associated with a 10,000 ؋ g pellet fraction from bovine liver, and it co-purified with the activity and immunoreactivity of a lysosomal protease, cathepsin B. Cathepsin B catalyzed the generation of p40 from MARCKS in a cell-free system and behaved similarly to the MCE with respect to mutants of MARCKS previously shown to be poor substrates for the MCE. Treatment of fibroblasts with a cell-permeable, specific inhibitor of cathepsin B, CA074-Me, resulted in parallel time-and concentration-dependent inhibition of cathepsin B and MCE activity. Incubation of a synthetic MARCKS phosphorylation site domain peptide with purified cathepsin B resulted in cleavage of the peptide at sites consistent with preferred cathepsin B substrate sites. These data provide evidence for the identity of the MCE as cathepsin B and suggest that this cleavage most likely takes place within lysosomes, perhaps as a result of specific lysosomal targeting sequences within the MARCKS primary sequence. The data also suggest a direct interaction between MARCKS and cathepsin B in cells and leave open the possibility that MARCKS may in some way regulate the protease for which it is a substrate.The myristoylated alanine-rich C kinase substrate (MARCKS) 1 is a prominent cellular substrate for protein kinase C (PKC) (1, 2). Expression of this heat-stable, acidic protein is essential for life, as demonstrated by the perinatal death of mice that are completely deficient in MARCKS (3). Complete lack of expression leads to gross abnormalities of central nervous system development; however, heterozygous mice, which express MARCKS at 50% wild-type levels, appear to be normal.Cellular levels of MARCKS are regulated by both transcriptional and translational mechanisms (4 -14). In addition, we recently demonstrated that the cellular concentrations of MARCKS can also be regulated by a proteolytic event. This proteolytic cleavage results in amino-and carboxyl-terminal fragments of MARCKS that co-exist in cells with the full-length protein. This cleavage of MARCKS was inhibited in intact fi...