Chagasin is a Trypanosoma cruzi protein that was recently characterized as a tight-binding inhibitor of papain-like cysteine proteases (CPs). Considering that parasite virulence and morphogenesis depend on the endogenous activity of lysosomal CPs of the cruzipain family, we sought to determine whether chagasin and cruzipain interact in the living cell. Ultrastructural studies showed that chagasin and cruzipain both localize to the Golgi complex and reservosomes (lysosome-like organelles), whereas free chagasin was found in small intracellular vesicles, suggesting that chagasin trafficking pathways might intersect with those of cruzipain. Taking advantage of the fact that sodium dodecyl sulphate and beta-mercaptoethanol prevent binding between the isolated proteins but do not dismantle preformed cruzipain-chagasin complexes, we obtained direct evidence that chagasin-cruzipain complexes are indeed formed in epimastigotes. Chagasin transfectants (fourfold increase in CP inhibitory activity) displayed low rates of differentiation (metacyclogenesis) and exhibited increased resistance to a synthetic CP inhibitor. These phenotypic changes were accompanied by a drastic reduction of soluble cruzipain activity and by upregulated secretion of cruzipain-chagasin molecular complexes. Analysis of six T. cruzi strains revealed that expression levels of cruzipain and chagasin are variable, but the molar ratios are fairly stable ( approximately 50:1) in most strains, with the exception of the G strain (5:1), which is poorly infective. On the same vein, we found that trypomastigotes overexpressing chagasin are less infective than wild-type parasites in vitro. The deficiency of chagasin overexpressers is caused by lower activity of membrane-associated CPs, because membranes recovered from wild-type trypomastigotes restored infectivity and this effect was nullified by the CP inhibitor E-64. In summary, our studies suggest that chagasin regulates the endogenous activity of CP, thus indirectly modulating proteolytic functions that are essential for parasite differentiation and invasion of mammalian cells.