Cathepsin B is a lysosomal cysteine protease exhibiting mainly dipeptidyl carboxypeptidase activity, which decreases dramatically above pH 5.5, when the enzyme starts acting as an endopeptidase. Since the common cathepsin B assays are performed at pH 6 and do not distinguish between these activities, we synthesized a series of peptide substrates specifically designed for the carboxydipeptidase activity of cathepsin B. The amino-acid sequences of the P(5)-P(1) part of these substrates were based on the binding fragments of cystatin C and cystatin SA, the natural reversible inhibitors of papain-like cysteine protease. The sequences of the P'(1)-P'(2) dipeptide fragments of the substrates were chosen on the basis of the specificity of the S'(1)-S'(2) sites of the cathepsin B catalytic cleft. The rates of hydrolysis by cathepsin B and papain, the archetypal cysteine protease, were monitored by a continuous fluorescence assay based on internal resonance energy transfer from an Edans to a Dabcyl group. The fluorescence energy donor and acceptor were attached to the C- and the N-terminal amino-acid residues, respectively. The kinetics of hydrolysis followed the Michaelis-Menten model. Out of all the examined peptides Dabcyl-R-L-V-G-F- E(Edans) turned out to be a very good substrate for both papain and cathepsin B at both pH 6 and pH 5. The replacement of Glu by Asp turned this peptide into an exclusive substrate for cathepsin B not hydrolyzed by papain. The substitution of Phe by Nal in the original substrate caused an increase of the specificity constant for cathepsin B at pH 5, and a significant decrease at pH 6. The results of kinetic studies also suggest that Arg in position P(4) is not important for the exopeptidase activity of cathepsin B, and that introducing Glu in place of Val in position P(2) causes an increase of the substrate preference towards this activity.