A rat homolog of human cystatin E/M was identified by differential display of transcripts induced during neuronal cell differentiation. A member of the family 2 cystatins, rat cystatin E/M is secreted, glycosylated and developmentally regulated. Rat cystatin E/M is expressed in brain, and is induced during differentiation of a conditionally immortalized E17 rat hippocampal cell line (H19-7) by bFGF or activated Raf via MEK-dependent and -independent signaling pathways. Rat cystatin E/M protein is increased post-transcriptionally in PC12 cells, and the protein is secreted into the medium of primary embryonal hippocampal cultures. Analysis of the K (i) of recombinant His-tagged rat cystatin E/M toward cathepsins B and H revealed that rat cystatin E/M has an inhibitor profile distinct from that of other members of the cystatin family. Motif swapping between rat cystatin E/M and human cystatin C, a well-characterized cystatin, identified some residues that can contribute to the specificity of inhibition. Taken together, these results describe a member of the cystatin family that has a distinct inhibitor profile and may play a role in neuronal development.