Transglutaminase 2 (EC 2.3.2.13; TG2 or TGase 2) plays important roles in the pathogenesis of many diseases, including cancers, neurodegeneration, and inflammatory disorders. Under normal conditions, however, mice lacking TGase 2 exhibit no obvious abnormal phenotype. TGase 2 expression is induced by chemical, physical, and viral stresses through tissue-protective signaling pathways. After stress dissipates, expression is normalized by feedback mechanisms. Dysregulation of TGase 2 expression under pathologic conditions, however, can potentiate pathogenesis and aggravate disease severity. Consistent with this, TGase 2 knockout mice exhibit reversal of disease phenotypes in neurodegenerative and chronic inflammatory disease models. Accordingly, TGase 2 is considered to be a potential therapeutic target. Based on structure–activity relationship assays performed over the past few decades, TGase 2 inhibitors have been developed that target the enzyme’s active site, but clinically applicable inhibitors are not yet available. The recently described the small molecule GK921, which lacks a group that can react with the active site of TGase 2, and efficiently inhibits the enzyme’s activity. Mechanistic studies revealed that GK921 binds at an allosteric binding site in the N-terminus of TGase 2 (amino acids (a.a.) 81–116), triggering a conformational change that inactivates the enzyme. Because the binding site of GK921 overlaps with the p53-binding site of TGase 2, the drug induces apoptosis in renal cell carcinoma by stabilizing p53. In this review, we discuss the possibility of developing TGase 2 inhibitors that target the allosteric binding site of TGase 2.