Several new cysteine proteases of the papain family have been discovered in the past few years. To help in the assignment of physiological roles and in the design of specific inhibitors, a clear picture of the specificities of these enzymes is needed. One of these novel enzymes, cathepsin X, displays a unique specificity, cleaving single amino acid residues at the C-terminus of substrates very efficiently. In this study, the carboxypeptidase activities and substrate specificity of cathepsins X and B have been investigated in detail and compared. Using quenched fluorogenic substrates and HPLC measurements, it was shown 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, a result supported by molecular modeling of enzyme-substrate complexes. Cleavage of a C-terminal dipeptide of a substrate by cathepsin X can become more important under conditions that preclude efficient monopeptidyl carboxypeptidase activity, e.g., nonoptimal interactions in subsites S(2)-S(1). These results confirm that cathepsin X is designed to function as a monopeptidyl carboxypeptidase. Contrary to a recent report [Klemencic, I., et al. (2000) Eur. J. Biochem. 267, 5404-5412], it is shown that cathepsins X and B do not share similar activity profiles, and that reagents are available to clearly distinguish the two enzymes. In particular, CA074 was found to inactivate cathepsin B at least 34000-fold more efficiently than cathepsin X. The insights obtained from this and previous studies have been used to produce an inhibitor designed to exploit the unique structural features responsible for the carboxypeptidase activity of cathepsin X. Although of moderate potency, this E-64 derivative is the first reported example of a cathepsin X-specific inhibitor.