Synovial fibroblasts (SFs) play a critical role in the pathogenesis of rheumatoid arthritis (RA) and are directly involved in joint destruction. Both SF-resident matrix metalloproteases and cathepsins have been implicated in cartilage degradation although their identities and individual contributions remain unclear. The aims of this study were to investigate the expression of cathepsin K in SFs, the correlation between cathepsin K expression and disease severity, and the contribution of cathepsin K to fibroblast-mediated collagen degradation. Immunostaining of joint specimens of 21 patients revealed high expression of cathepsin K in SFs in the synovial lining and the stroma of synovial villi, and to a lesser extent in CD68-positive cells of the synovial lining. Cathepsin K-positive SFs were consistently observed at sites of cartilage and bone degradation. Expression levels of cathepsin K in the sublining and vascularized areas of inflamed synovia showed a highly significant negative correlation with results derived from the Hannover Functional Capacity Questionnaire (r = 0.78, P = 0.003; and r = 0.70, P = 0.012, respectively) as a measure of the severity of RA in individual patients. For comparison, there was no correlation between Hannover Functional Capacity Questionnaire and cathepsin S whose expression is limited to CD-68-positive macrophage-like synoviocytes. The expression of cathepsin K was also demonstrated in primary cell cultures of RA-SFs. Co-cultures of SFs on cartilage disks revealed the ability of fibroblast-like cells to phagocytose collagen fibrils whose intralysosomal hydrolysis was prevented in the presence of a potent cathepsin K inhibitor but not by an inhibitor effective against cathepsins L, B, and S. The selective and critical role of cathepsin K in articular cartilage and subchondral bone erosion was further corroborated by the finding that cathepsin K has a potent aggrecan-degrading activity and that cathepsin K-generated aggrecan cleavage products specifically potentiate the collagenolytic activity of cathepsin K toward type I and II collagens. This study demonstrates for the first time a critical role of cathepsin K in cartilage degradation by SFs in RA that is comparable to its well-known activity in osteoclasts.