The endolysosomal system comprises a unique environment for proteolysis, which is regulated in a manner that apparently does not involve protease inhibitors. The system comprises a series of membrane-bound intracellular compartments, within which endocytosed material and redundant cellular components are hydrolysed. Endocytosed material tends to flow vectorially through the system, proceeding through the early endosome, the endosome carrier vesicle, the late endosome and the lysosome. Phagocytosis and autophagy provide alternative entry points into the system. Late endosomes, lysosome/late endosome hybrid organelles, phagosomes and autophagosomes are the principal sites for proteolysis. In each case, hydrolytic competence is due to components of the endolysosomal system, i.e. proteases, lysosome-associated membrane proteins, H(+)-ATPases and possibly cysteine transporters. The view is emerging that lysosomes are organelles for the storage of hydrolases, perhaps in an inactivated form. Once a substrate has entered a proteolytically competent environment, the rate-limiting proteolytic steps are probably effected by cysteine endoproteinases. As these are affected by pH and possibly redox potential, they may be regulated by the organelle luminal environment. Regulation is probably also affected, among other factors, by organelle fusion reactions, whereby the meeting of enzyme and substrate may be controlled. Such systems would permit simultaneous regulation of a number of unrelated hydrolases.