During early pregnancy, the steroid hormone progesterone induces differentiation of uterine stroma to decidual cells, which regulate embryo-uterine interactions. The progesterone-induced signaling molecules that participate in the formation and function of decidua remain poorly understood. We recently utilized high-density oligonucleotide microarrays to identify several genes whose expression is markedly altered in pregnant uterus in response to RU486, a well characterized antagonist of the progesterone receptor (PR). Our study revealed that the gene encoding cytotoxic T-lymphocyte antigen-2beta (CTLA-2beta), a cysteine protease inhibitor, is expressed during PR-induced decidualization. The spatio-temporal expression of CTLA-2beta mRNA precisely overlapped with the decidual phase of pregnancy. Interestingly, administration of progesterone to estrogen-primed ovariectomized mice failed to induce CTLA-2beta expression. A concomitant artificial decidual stimulation was necessary to trigger this expression. Uteri of PR knockout mice failed to express this mRNA, even after a combined administration of steroid hormones and artificial stimulation. The uterine expression of CTLA-2beta was, therefore, dependent on PR as well as other unknown factor(s) associated with decidual response. To identify the molecular target(s) of CTLA-2beta,we analyzed its interaction with proteins present in soluble extracts prepared from day 7 pregnant uteri containing implanted embryos. A protein affinity strategy employing recombinant CTLA-2beta helped us to determine that cathepsin L, a cysteine protease, is one of its targets in the pregnant uterus. Consistent with this finding, expression of cathepsin L was detected in the giant trophoblast cells of the ectoplacental cone on day 7 of pregnancy. Collectively, our results support the hypothesis that expression of CTLA-2beta in the decidua may regulate implantation of the embryo by neutralizing the activities of one or more proteases generated by the proliferating trophoblast.