Extracellular proteolysis of thyroglobulin at the apical surface of thyroid epithelial cells results in liberation of thyroxine, and is mediated by lysosomal cysteine proteases such as cathepsins B and L. Here, we report on the expression of the cysteine protease cathepsin K in thyroid epithelial cells. The cDNA for porcine thyroid cathepsin K showed homologies ranging from 71% to 94% to the cDNA of cathepsin K from various species and cell types. The deduced amino acid sequence of porcine thyroid cathepsin K predicted a 37 kDa preproenzyme, with the active site residues Cys-140, His-277 and Asn-297, and one potential N-glycosylation site. The localization of cathepsin K was not restricted to lysosomes. Rather, secreted cathepsin K was predominantly found within the follicular lumen and in association with the apical plasma membrane of thyroid epithelial cells. Enzyme cytochemistry showed that cell-surface associated cathepsin K was proteolytically active at neutral pH. In vitro, recombinant cathepsin K liberated thyroxine from thyroglobulin by limited proteolysis at neutral pH. We postulate that its localization enables cathepsin K to contribute to the extracellular proteolysis of thyroglobulin, i.e. thyroid hormone liberation, at the apical surface of thyroid epithelial cells in situ.