Cystatin M/E is a cysteine protease inhibitor with two distinct binding sites for papain-like cysteine proteases (family C1) and the asparaginyl endopeptidase (AEP) legumain of family C13. We have previously demonstrated that deficiency of cystatin M/E in mice causes ichthyosiform skin changes and barrier disruption, which could be caused by unrestrained AEP activity. Recently, we provided biochemical evidence that human cathepsin V (CTSV) and cathepsin L (CTSL) are additional biological targets for human cystatin M/E. To address the possible role of these three proteases and their inhibitor in epidermal differentiation, we investigated the localization of these proteins in normal human skin. Whereas CTSL and AEP were broadly expressed in epithelial cells of the skin, we found a specific colocalization of cystatin M/E and CTSV in the stratum granulosum and in the root sheets of the hair follicle, using immunofluorescence microscopy. Immunoelectron microscopy revealed that cystatin M/E and CTSV are separately transported within the lamellar granules. Cystatin M/E was also found in the extracellular space in the stratum corneum associated with corneodesmosomes, where it was closely associated with CTSV. Based on the striking stratum-specific colocalization of cystatin M/E and CTSV, we propose that these molecules could have an important role in epidermal differentiation and desquamation.