Post-translational proteolytic modification by limited proteolysis is not only a biological process that produces biologically active proteins (peptides), but because almost all intracellular biologically active proteins are synthesized as pre-pro forms, ordered limited proteolysis by specific proteases is an essential process. We will discuss on the proteolytic modification to make biological active proteins (peptides), with the focus put especially on the antigen processing by specific proteases (cathepsins). To express immunity or allergy as the physiological events, the antigenic proteins should be processed to 15-mer epitope (peptide) by specific cathepsins in antigen presenting cells, such as macrophages or dendritic cells. The kinds of antibodies and cytokines to be produced are decided by processed epitope from an antigen. For instance, the signal transduction to helper T-1 (Th-1) type response or Th-2 type response is decided by the kind of processing cathepsin. IgE and IL-4 are produced by the processing of ovalbumin by cathepsin B. Conversely, IgG2a and INFα are both produced when ovalbumin is processed by cathepsin L. The class switching of antibody and cytokine production is regulated by the antigen signal transduction to Th-1 type or Th-2 type. We synthesized specific inhibitors for individual cathepsins, so that we can regulate the class switching of antibody production by our specific inhibitors. On the other hand, intracellular cathepsin activities are regulated in vivo by two kinds of cystatins: cystatin α and cystatin β. The cystatin α is post-translationally covalently modified in skin via phosphorylation and transglutamination. The cystatin β activity is regulated by covalent binding with glutathione, so that it is modified by glutathionation (inactive) and deglutathionation (active). In other words, the cystatin β inhibitory activities are regulated by redox potential in cells. As a result, intracellular cathepsin activities are regulated by the changes of intracellular redox potential via their cystatin activities. The post-translational proteolytic modifications are regulated by various cathepsin activities, which are further regulated by cystatin activities.