Testican-1, a secreted proteoglycan enriched in brain, has a single thyropin domain that is highly homologous to domains previously shown to inhibit cysteine proteases. We demonstrate that purified recombinant human testican-1 is a strong competitive inhibitor of the lysosomal cysteine protease, cathepsin L, with a K-i of 0.7 nM, but it does not inhibit the structurally related lysosomal cysteine protease cathepsin B. Testican-1 inhibition of cathepsin L is independent of its chondroitin sulfate chains and is effective at both pH 5.5 and 7.2. At neutral pH, testican-1 also stabilizes cathepsin L, slowing pH-induced denaturation and allowing the protease to remain active longer, although the rate of proteolysis is reduced. These data indicate that testican-1 is capable of modulating cathepsin L activity both in intracellular vesicles and in the extracellular milieu.