Cyst fluid from women with gross cystic breast disease was found to contain protease activity when assayed against [14C]albumin. At least six different proteases were detected when the fluid was fractionated by a combination of S-300 Sephacel, hydroxylapatite, and DEAE-Sephacel chromatographic techniques. The distribution of the proteases appeared to be related to the ionic composition of the fluids. A major protease component, found in both high Na and high K fluids, was isolated. It showed chymotryptic cleavage characteristics against the beta-chain of insulin. It was partially inhibited by alpha 2-macroglobulin, N-tosyl-L-phenylalanine chloromethyl ketone, and benzamidine but not by leupeptin, pepstatin, N-tosyl-L-lysine chloromethyl ketone, or alpha 1-protease inhibitor. The protease has an apparent molecular weight of 110,000 with Mr 24,000 subunits. This protease may be identical or closely associated with Haagensen's GCDFP-24 progesterone binding protein which was isolated in a similar manner. An imbalance between protease and protease inhibitors in cyst fluid may account for gross cyst formation and may be involved in the tumorigenic process. The accumulation of poorly diffusible peptide fragments, as a result of protease activity, would increase the oncotic pressure leading to enlargement of the cyst cavity as water enters to reestablish osmotic equilibrium.