Prostasin (also called channel activating protease-1 (CAP1)) is an extracellular serine protease implicated in the modulation of fluid and electrolyte regulation via proteolysis of the epithelial sodium channel. Several disease states, particularly hypertension, can be affected by modulation of epithelial sodium channel activity. Thus, understanding the biochemical function of prostasin and developing specific agents to inhibit its activity could have a significant impact on a widespread disease. We report the expression of the prostasin proenzyme in Escherichia coli as insoluble inclusion bodies, refolding and activating via proteolytic removal of the N-terminal propeptide. The refolded and activated enzyme was shown to be pure and monomeric, with kinetic characteristics very similar to prostasin expressed from eukaryotic systems. Active prostasin was crystallized, and the structure was determined to 1.45 A resolution. These apoprotein crystals were soaked with nafamostat, allowing the structure of the inhibited acyl-enzyme intermediate structure to be determined to 2.0 A resolution. Comparison of the inhibited and apoprotein forms of prostasin suggest a mechanism of regulation through stabilization of a loop which interferes with substrate recognition.