A new member of the human cystatin superfamily, called cystatin E, has been found by expressed sequence tag (EST) sequencing in amniotic cell and fetal skin epithelial cell cDNA libraries. The sequence of a full-length amniotic cell cDNA clone contained an open reading frame encoding a putative 28-residue signal peptide and a mature protein of 121 amino acids, including four cysteine residues and motifs of importance for the inhibitory activity of Family 2 cystatins like cystatin C. Recombinant cystatin E was produced in a baculovirus expression system and isolated. An antiserum against the recombinant protein could be used for affinity purification of cystatin E from human urine, as confirmed by N-terminal sequencing. The mature recombinant protein processed by insect cells started at amino acid 4 (cystatin C numbering), and displayed reversible inhibition of papain and cathepsin B (Ki values of 0.39 and 32 nM, respectively), in competition with substrate. Cystatin E is thus a functional cysteine proteinase inhibitor despite relatively low amino acid sequence similarities with human cystatins (26-34% identity with sequences for the Family 2 cystatins C, D, S, SN, and SA; <30% with the Family 1 cystatins, A and B, and domains 2 and 3 of the Family 3 cystatin, kininogen). Unlike other human low Mr cystatins, cystatin E is a glycoprotein, carrying an N-linked carbohydrate chain at position 108. Northern blot analysis revealed that the cystatin E gene is expressed in most human tissues, with the highest mRNA amounts found in uterus and liver. A strikingly high incidence of cystatin E clones in cDNA libraries from fetal skin epithelium and amniotic membrane cells (>0.5% of clones sequenced) indicates a protective role of cystatin E during fetal development.