We show that gamma-glutamyl transpeptidase (GGT) is a glutathionase that enables cells to use extracellular glutathione as a source of cysteine. We transfected NIH/3T3 mouse fibroblasts with a plasmid containing cDNA for human GGT, and obtained stably transformed cell lines that expressed GGT in its proper orientation on the outer surface of the cell. NIH/3T3 fibroblasts require cysteine for growth and are unable to use extracellular glutathione as a source of cysteine. We demonstrate GGT-positive fibroblasts are able to grow in cysteine-free medium supplemented with glutathione. Cysteine derived from the cleavage of extracellular glutathione can be used to maintain intracellular levels of glutathione. GGT-positive NIH/3T3 cells were able to replenish intracellular glutathione when incubated in cysteine-free medium containing glutathione. GGT-negative cells could not. Therefore, GGT is a glutathionase that provides the cell with access to a secondary source of cysteine.