Cathepsins are the most abundant lysosomal proteases that are mainly found in acidic endo/lysosomal compartments where they play a vital role in intracellular protein degradation, energy metabolism, and immune responses among a host of other functions. The discovery that cathepsins are secreted and remain functionally active outside of the lysosome has caused a paradigm shift. Contemporary research has unraveled many versatile functions of cathepsins in extralysosomal locations including cytosol and extracellular space. Nevertheless, extracellular cathepsins are majorly upregulated in pathological states and are implicated in a wide range of diseases including cancer and cardiovascular diseases. Taking advantage of the differential expression of the cathepsins during pathological conditions, much research is focused on using cathepsins as diagnostic markers and therapeutic targets. A tailored therapeutic approach using selective cathepsin inhibitors is constantly emerging to be safe and efficient. Moreover, recent development of proteomic-based approaches for the identification of novel physiological substrates offers a major opportunity to understand the mechanism of cathepsin action. In this review, we summarize the available evidence regarding the role of cathepsins in health and disease, discuss their potential as biomarkers of disease progression, and shed light on the potential of extracellular cathepsin inhibitors as safe therapeutic tools.