Although protein recapture and catabolism is known as a key function of kidney proximal tubular cells (PTCs), to date, no single protease has been shown to be required. Asparagine endopeptidase (AEP) is an unusually specific endosomal and lysosomal cysteine protease, expressed at high levels in the PTCs of the mammalian kidney. We report that mice lacking AEP accumulate a discrete set of proteins in their PTC endosomes and lysosomes, which indicates a defect in the normal catabolism of proteins captured from the filtrate. Moreover, the mice develop progressive kidney pathology, including hyperplasia of PTCs, interstitial fibrosis, development of glomerular cysts, and renal pelvis dilation. By 6 mo of age, the glomerular filtration rate in AEP-null mice dropped by almost a factor of 2, and the mice developed proteinuria. We also show that EGF receptor levels are significantly higher in AEP-null PTCs, which likely explains the hyperplasia, and we show that chemical inhibition of AEP activity suppresses down-regulation of the EGF receptor in vitro. Thus, AEP is required for normal protein catabolism by PTCs, and its loss induces proliferative and other abnormalities in the murine kidney, at least in part through defective regulation of the EGF receptor.