To define the cellular processing of human cystatin C as well as to lay the groundwork for investigating its contribution to lcelandic Hereditary Cerebral Hemorrhage with Amyloidosis (HCHWA-I), we have characterized the trafficking, secretion, and extracellular fate of human cystatin C in transfected Chinese hamster ovary (CHO) cells. It is constitutively secreted with an intracellular half-life of 72 min. Gel filtration of cell lysates revealed the presence of three cystatin C immunoreactive species; an 11 kDa species corresponding to monomeric cystatin C, a 33 kDa complex that is most likely dimeric cystatin C and immunoreactive material, > or = 70 kDa, whose composition is unknown. Intracellular monomeric cystatin C is functionally active as a cysteine protease inhibitor, while the dimer is not. Medium from the transfected CHO cells contained only active monomeric cystatin C indicating that the cystatin C dimer, formed during intracellular trafficking, is converted to monomer at or before secretion. Cells in which exit from the endoplasmic reticulum (ER) was blocked with brefeldin A contained the 33 kDa species, indicating that cystatin C dimerization occurs in the ER. After removal of brefeldin A, there was a large increase in intracellular monomer suggesting that dimer dissociation occurs later in the secretion pathway, after exiting the ER but prior to release from the cell. Extracellular monomeric cystatin C was found to be internalized into lysosomes where it again dimerized, presumably as a consequence of the low pH of late endosome/lysosomes. As a dimer, cystatin C would be prevented from inhibiting the lysosomal cysteine proteases. These results reveal a novel mechanism, transient dimerization, by which cystatin C is inactivated during the early part of its trafficking through the secretory pathway and then reactivated prior to secretion. Similarly, its uptake by the cell also leads to its redimerization in the lysosomal pathway.