Molecular dynamics simulations using a combined QM/MM potential have been performed to study the catalytic mechanism of human cathepsin K, a member of the papain family of cysteine proteases. We have determined the two-dimensional free energy surfaces of both acylation and deacylation steps to characterize the reaction mechanism. These free energy profiles show that the acylation step is rate limiting with a barrier height of 19.8 kcal/mol in human cathepsin K and of 29.3 kcal/mol in aqueous solution. The free energy of activation for the deacylation step is 16.7 kcal/mol in cathepsin K and 17.8 kcal/mol in aqueous solution. The reduction of free energy barrier is achieved by stabilization of the oxyanion in the transition state. Interestingly, although the "oxyanion hole" has been formed in the Michaelis complex, the amide units do not donate hydrogen bonds directly to the carbonyl oxygen of the substrate, but they stabilize the thiolate anion nucleophile. Hydrogen-bonding interactions are induced as the substrate amide group approaches the nucleophile, moving more than 2 A and placing the oxyanion in contact with Gln19 and the backbone amide of Cys25. The hydrolysis of peptide substrate shares a common mechanism both for the catalyzed reaction in human cathepsin K and for the uncatalyzed reaction in water. Overall, the nucleophilic attack by Cys25 thiolate and the proton-transfer reaction from His-162 to the amide nitrogen are highly coupled, whereas a tetrahedral intermediate is formed along the nucleophilic reaction pathway.