The precise origin of breast cyst fluid remains obscure. Molina has presented evidence that type II cysts (high Na/K ratio) may be transudative, that is, partly derived from plasma elements which enter through gap junctions, while Type I cysts (high K/Na ratio) are primarily secretory. In transudative cysts, plasma protease inhibitors may be present, but the balance between protease and its inhibitors may fluctuate as a result of as yet undetermined circumstances. An imbalance between the protease activity of cyst fluid and its inhibitors may be involved in the pathogenesis of breast gross cystic disease. Accumulation of protein fragments with resistant bonds would produce an elevated oncotic pressure causing a shift of fluid into the cyst capsule. Albumin is a good substrate for the protease, which may account for its low concentration in cyst fluid. The major protease fraction closely corresponds to the progesterone binding protein (GCDFP-24) described by Haagensen. Affinity columns containing aprotinin or benzamidine ligands retain the protease which can then be eluted with 0.5 M NaCl. The HD1 protease and progesterone binding protein are either tightly complexed or are the same protein. Cyst fluid is a complex mixture of biomolecules. If the progesterone binding protein is a protease, many questions must be answered concerning the influence of cyst fluid steroids, lipids, anions, and cations on enzyme action. Determination of the amino acid sequence of HD1 may help elucidate the source of the enzyme and its relationship to other tissue proteases. Human plasma contains inhibitors of this protease activity. When pooled, dialyzed plasma was mixed with pooled, dialyzed cyst fluid, the ratio of plasma/cyst fluid at which all activity was inhibited was 6/1. A comparison of the rate of cleavage of three 14C-protein substrates shows that cyst fluid proteases cleave in a characteristic manner, distinct from either trypsin or calpain. A simple method for semiquantitative estimation of protease activity in cyst fluid is described which utilizes prestained Coomassie blue-albumin containing agarose gel plates. All cyst fluids tested had protease activity but showed variability in their ability to cleave 14C-albumin by a factor of 4. There is much direct and indirect evidence that proteases are involved in the cancer process. In view of the higher than normal incidence of breast cancer in women who have had gross cystic breast disease, the possibility exists that an imbalance between these proteases and their inhibitors is somehow involved.