It is generally accepted that the role of cathepsin L in cancer involves its activities outside the cells once it has been secreted. However, cathepsin L isoforms that are devoid of a signal peptide were recently shown to be present in the nucleus where they proteolytically process the CCAAT-displacement protein/cut homeobox (CDP/Cux) transcription factor. A role for nuclear cathepsin L in cell proliferation could be inferred from the observation that the CDP/Cux processed isoform can accelerate entry into S phase. Here, we report that in many transformed cells the proteolytic processing of CDP/Cux is augmented and correlates with increased cysteine protease expression and activity in the nucleus. Taking advantage of an antibody that recognizes the prodomain of human cathepsin L, we showed that human cells express short cathepsin L species that do not contain a signal peptide, do not transit through the endoplasmic reticulum, are not glycosylated, and localize to the nucleus. We also showed that transformation by the ras oncogene causes rapid increases both in the production of short nuclear cathepsin L isoforms and in the processing of CDP/Cux. Using a cell-based assay, we showed that a cell-permeable inhibitor of cysteine proteases is able to delay the progression into S phase and the proliferation in soft agar of ras-transformed cells, whereas the non-cell-permeable inhibitor had no effect. Taken together, these results suggest that the role of cathepsin L in cancer might not be limited to its extracellular activities but may also involve its processing function in the nucleus.