Cystatin C (CST3) is a cysteine protease inhibitor that regulates lysosomal enzyme activity and is reported to be involved in the process of neurodegeneration. In the present study, we investigated whether CST3 interacts with other proteins and affects neurodegeneration in vitro and under disease conditions. We intended to identify any protein that interacts with CST3 by using a yeast two-hybrid system, and found prosaposin (PSAP) as a candidate protein. The binding of CST3 and PSAP was confirmed using an immunoprecipitation-based in vitro assay. An enzyme activity assay revealed that PSAP ameliorated CST3-mediated inhibition of cathepsin B activity. To investigate further, CST3 and PSAP were co-expressed in HeLa cells and in a human neuronal cell line (A1). Subsequent immunocytochemical studies demonstrated that they were co-localized mainly in the lysosomes. In spinal motor neurons of autopsy cases, both proteins showed a granular staining pattern. However, the staining intensities of CST3 and PSAP decreased in Bunina body-positive motor neurons of patients with amyotrophic lateral sclerosis (ALS). Further analysis with immunofluorescence staining revealed that CST3 was immunopositive in the inclusions of ALS motor neurons, where it was closely associated, and sometimes co-localized, with PSAP. CST3 immunoreactivity is recognized as a marker for Bunina bodies in ALS, suggesting that PSAP might also be included in Bunina bodies. The interaction of CST3 and PSAP may alter their functions, leading to motor neuron degeneration in ALS.