Protease-activated receptor-2 is widely expressed in mammalian epithelial, immune and neural tissues. Cleavage of PAR2 by serine proteases leads to self-activation of the receptor by the tethered ligand SLIGRL. The contribution of other classes of proteases to PAR activation has not been studied in detail. Cathepsin S is a widely expressed cysteine protease that is upregulated in inflammatory conditions. It has been suggested thatcathepsin S activates PAR2. However, cathepsin S activation of PAR2 has not been demonstrated directly nor has the potential mechanism of activation been identified. We show that cathepsin S cleaves near the N-terminus of PAR2 to expose a novel tethered ligand, KVDGTS. The hexapeptide KVDGTS generates downstream signaling events specific to PAR2 but is weaker than SLIGRL. Mutation of the cathepsin S cleavage site prevents receptor activation by the protease while KVDGTS retains activity. In conclusion, the range of actions previously ascribed to cysteine cathepsins in general, and cathepsin S in particular, should be expanded to include molecular signaling. Such signaling may link together observations that had been attributed previously to PAR2 or cathepsin S individually. These interactions may contribute to inflammation.