L-Asparaginase is a key therapeutic agent for treatment of childhood acute lymphoblastic leukemia (ALL). There is wide individual variation in pharmacokinetics, and little is known about its metabolism. The mechanisms of therapeutic failure with l-asparaginase remain speculative. Here, we now report that 2 lysosomal cysteine proteases present in lymphoblasts are able to degrade l-asparaginase. Cathepsin B (CTSB), which is produced constitutively by normal and leukemic cells, degraded asparaginase produced by Escherichia coli (ASNase) and Erwinia chrysanthemi. Asparaginyl endopeptidase (AEP), which is overexpressed predominantly in high-risk subsets of ALL, specifically degraded ASNase. AEP thereby destroys ASNase activity and may also potentiate antigen processing, leading to allergic reactions. Using AEP-mediated cleavage sequences, we modeled the effects of the protease on ASNase and created a number of recombinant ASNase products. The N24 residue on the flexible active loop was identified as the primary AEP cleavage site. Sole modification at this site rendered ASNase resistant to AEP cleavage and suggested a key role for the flexible active loop in determining ASNase activity. We therefore propose what we believe to be a novel mechanism of drug resistance to ASNase. Our results may help to identify alternative therapeutic strategies with the potential of further improving outcome in childhood ALL.