Cysteine proteases play a crucial role in the development of the human malaria parasites Plasmodium falciparum and Plasmodium vivax. Our earlier studies demonstrated that these enzymes are equipped with specific domains for defined functions and further suggested the mechanism of activation of cysteine proteases. The activities of these proteases are regulated by a new class of endogenous inhibitors of cysteine proteases (ICPs). Structural studies of the ICPs of Trypanosoma cruzi (chagasin) and Plasmodium berghei (PbICP) indicated that three loops (termed BC, DE, and FG) are crucial for binding to target proteases. Falstatin, an ICP of P. falciparum, appears to play a crucial role in invasion of erythrocytes and hepatocytes. However, the mechanism of inhibition of cysteine proteases by falstatin has not been established. Our study suggests that falstatin is the first known ICP to function as a multimeric protein. Using site-directed mutagenesis, hemoglobin hydrolysis assays and peptide inhibition studies, we demonstrate that the BC loop, but not the DE or FG loops, inhibits cysteine proteases of P. falciparum and P. vivax via hydrogen bonds. These results suggest that the BC loop of falstatin acts as a hot-spot target for inhibiting malarial cysteine proteases. This finding suggests new strategies for the development of anti-malarial agents based on protease-inhibitor interactions.