Using serial analysis of gene expression on cultured human keratinocytes we found high expression levels of genes putatively involved in host protection and defense, such as proteinase inhibitors and antimicrobial proteins. One of these expressed genes was the recently discovered cysteine proteinase inhibitor cystatin M/E that has not been characterized so far at the protein level with respect to tissue distribution and additional biologic properties. Here we report that cystatin M/E has a tissue-specific expression pattern in which high expression levels are restricted to the stratum granulosum of normal human skin, the stratum granulosum/spinosum of psoriatic skin, and the secretory coils of eccrine sweat glands. Low expression levels were found in the nasal cavity. The presence of cystatin M/E in skin and the lack of expression in a variety of other tissues was verified both at the protein level by immunohistochemistry or western blotting, and at the mRNA level by reverse transcriptase polymerase chain reaction or northern blotting. Using biotinylated hexapeptide probes we found that cystatin M/E is an efficient substrate for tissue type transglutaminase and for transglutaminases extracted from stratum corneum, and that it acts as an acyl acceptor but not as an acyl donor. Western blot analysis showed that recombinant cystatin M/E could be cross-linked to a variety of proteins extracted from stratum corneum. In vitro, we found that cystatin M/E expression in cultured keratinocytes is upregulated at the mRNA and protein level, upon induction of differentiation. We demonstrate that cystatin M/E, which has a putative signal peptide, is indeed a secreted protein and is found in vitro in culture supernatant and in vivo in human sweat by enzyme-linked immunosorbent assay or western blotting. Cystatin M/E showed moderate inhibition of cathepsin B but was not active against cathepsin C. We speculate that cystatin M/E is unlikely to be a physiologically relevant inhibitor of intracellular lysosomal cysteine proteinases but rather functions as an inhibitor of self and nonself cysteine proteinases that remain to be identified.