Proteolytic activity is important in the lifecycles of parasites and their interactions with hosts. Cysteine proteases have been best studied in Giardia, but other protease classes have been implicated in growth and/or differentiation. In this study, we employed bioinformatics to reveal the complete set of putative proteases in the Giardia genome. We identified 73 peptidase homologs distributed over 5 catalytic classes in the genome. Serial analysis of gene expression of the G. lamblia lifecycle found thirteen protease genes with significant transcriptional variation over the lifecycle, with only one serine protease transcript upregulated late in encystation. The translated gene sequence of this encystation-specific transcript was most similar to eukaryotic subtilisin-like proprotein convertases (SPC), although the typical catalytic triad was not identified. Epitope-tagged gSPC protein expressed in Giardia under its own promoter was upregulated during encystation with highest expression in cysts and it localized to encystation-specific secretory vesicles (ESV). Total gSPC from encysting cells produced proteolysis in gelatin gels that co-migrated with the epitope-tagged protease in immunoblots. Immuno-purified gSPC also had gelatinase activity. To test whether endogenous gSPC activity is involved in differentiation, trophozoites and cysts were exposed to the specific serine proteinase inhibitor 4-(2-aminoethyl)-benzenesulfonyl fluoride hydrochloride (AEBSF). After 21 h encystation, a significant decrease in ESV was observed with 1mM AEBSF and by 42 h the number of cysts was significantly reduced, but trophozoite growth was not inhibited. Concurrently, levels of cyst wall proteins 1 and 2, and AU1-tagged gSPC protein itself were decreased. Excystation of G. muris cysts was also significantly reduced in the presence of AEBSF. These results support the idea that serine protease activity is essential for Giardia encystation and excystation.