Excessive activation of calpains (calcium-activated neutral proteases) is observed following spinal cord contusion injury, traumatic brain injury, stroke, and in neurodegenerative disorders including Alzheimer's disease. Calpain inhibition represents an attractive therapeutic target, but current calpain inhibitors possess relatively weak potency, poor specificity, and in many cases, limited cellular and blood-brain barrier permeability. We developed novel calpain inhibitors consisting of the endogenous inhibitor, calpastatin or its inhibitory domain I, fused to the protein transduction domain of the HIV trans-activator (Tat) protein (Tat(47-57)). The Tat-calpastatin fusion proteins were potent calpain inhibitors in a cell-free activity assay, but did not inhibit cellular calpain activity in primary rat cortical neurons when applied exogenously at concentrations up to 5 microM. The fusion proteins were able to transduce neurons, but were localized within endosome-like structures. A similar endosomal uptake was observed for Tat-GFP. Together, the results suggest that endosomal uptake of the Tat-calpastatin prevents its interaction with calpain in other cellular compartments. Endosomal uptake of proteins fused to the Tat protein transduction domain severely limits the applications of this methodology.