Progranulin (PGRN) is an evolutionarily conserved glycoprotein associated with several disease states, including neurodegeneration, cancer, and autoimmune disorders. This protein has recently been implicated in the regulation of lysosome function, whereby PGRN may bind to and promote the maturation and activity of the aspartyl protease cathepsin D (proCTSD, inactive precursor; matCTSD, mature, enzymatically active form). As the full-length PGRN protein can be cleaved into smaller peptides, called granulins, we assessed the function of these granulin peptides in binding to proCTSD and stimulating matCTSD enzyme activity in vitro. Here, we report that full-length PGRN and multi-granulin domain peptides bound to proCTSD with low to submicromolar binding affinities. This binding promoted proCTSD destabilization, the magnitude of which was greater for multi-granulin domain peptides than for full-length PGRN. Such destabilization correlated with enhanced matCTSD activity at acidic pH. The presence and function of multi-granulin domain peptides have typically been overlooked in previous studies. This work provides the first in vitro quantification of their binding and activity on proCTSD. Our study highlights the significance of multi-granulin domain peptides in the regulation of proCTSD maturation and enzymatic activity and suggests that attention to PGRN processing will be essential for the future understanding of the molecular mechanisms leading to neurodegenerative disease states with loss-of-function mutations in PGRN.