Cystatins are a family of naturally occurring cysteine protease inhibitors, yet the target proteases and biological processes they regulate are poorly understood. Cystatin F is expressed selectively in immune cells and is the only cystatin to be synthesised as an inactive disulphide-linked dimeric precursor. Here, we show that a major target of cystatin F in different immune cell types is the aminopeptidase cathepsin C, which regulates the activation of effector serine proteases in T cells, natural killer cells, neutrophils and mast cells. Surprisingly, recombinant cystatin F was unable to inhibit cathepsin C in vitro even though overexpression of cystatin F suppressed cellular cathepsin C activity. We predicted, using structural models, that an N-terminal processing event would be necessary before cystatin F can engage cathepsin C and we show that the intracellular form of cystatin F indeed has a precise N-terminal truncation that creates a cathepsin C inhibitor. Thus, cystatin F is a latent protease inhibitor itself regulated by proteolysis in the endocytic pathway. By targeting cathepsin C, it may regulate diverse immune cell effector functions.