The carboxypeptidase and endopeptidase activities of cathepsins X and B, as well as their inhibition by E-64 derivatives, have been investigated in detail and compared. The results clearly demonstrate that cathepsins X and B do not share similar activity profiles against substrates and inhibitors. Using quenched fluorogenic substrates, we show that cathepsin X preferentially cleaves substrates through a monopeptidyl carboxypeptidase pathway, while cathepsin B displays a preference for the dipeptidyl pathway. The preference for one or the other pathway is about the same for both enzymes, i. e. approximately 2 orders of magnitude. Cleavage of a C-terminal dipeptide of a substrate by cathepsin X can be observed under conditions that preclude efficient monopeptidyl carboxypeptidase activity. In addition, an inhibitor designed to exploit the unique structural features responsible for the carboxypeptidase activity of cathepsin X has been synthesized and tested against cathepsins X, B and L. Although of moderate potency, this E-64 derivative is the first reported example of a cathepsin X-specific inhibitor. By comparison, CA074 was found to inactivate cathepsin B at least 34000-fold more efficiently than cathepsin X.