Endothelial dysfunction is a central pathomechanism in diabetes-associated complications. We hypothesized a pathogenic role in this dysfunction of cathepsin S (Cat-S), a cysteine protease that degrades elastic fibers and activates the protease-activated receptor-2 (PAR2) on endothelial cells. We found that injection of mice with recombinant Cat-S induced albuminuria and glomerular endothelial cell injury in a PAR2-dependent manner. In vivo microscopy confirmed a role for intrinsic Cat-S/PAR2 in ischemia-induced microvascular permeability. In vitro transcriptome analysis and experiments using siRNA or specific Cat-S and PAR2 antagonists revealed that Cat-S specifically impaired the integrity and barrier function of glomerular endothelial cells selectively through PAR2. In human and mouse type 2 diabetic nephropathy, only CD68(+) intrarenal monocytes expressed Cat-S mRNA, whereas Cat-S protein was present along endothelial cells and inside proximal tubular epithelial cells also. In contrast, the cysteine protease inhibitor cystatin C was expressed only in tubules. Delayed treatment of type 2 diabetic db/db mice with Cat-S or PAR2 inhibitors attenuated albuminuria and glomerulosclerosis (indicators of diabetic nephropathy) and attenuated albumin leakage into the retina and other structural markers of diabetic retinopathy. These data identify Cat-S as a monocyte/macrophage-derived circulating PAR2 agonist and mediator of endothelial dysfunction-related microvascular diabetes complications. Thus, Cat-S or PAR2 inhibition might be a novel strategy to prevent microvascular disease in diabetes and other diseases.