A new fragment-based method for the rapid development of novel and distinct classes of nonpeptidic protease inhibitors, Substrate Activity Screening (SAS), is described. This method consists of three steps: (1) a library of N-acyl aminocoumarins with diverse, low molecular weight N-acyl groups is screened to identify protease substrates using a simple fluorescence-based assay, (2) the identified N-acyl aminocoumarin substrates are optimized by rapid analogue synthesis and evaluation, and (3) the optimized substrates are converted to inhibitors by direct replacement of the aminocoumarin with known mechanism-based pharmacophores. The SAS method was successfully applied to the cysteine protease cathepsin S, which is implicated in autoimmune diseases. Multiple distinct classes of nonpeptidic substrates were identified upon screening an N-acyl aminocoumarin library. Two of the nonpeptidic substrate classes were optimized to substrates with >8000-fold improvements in cleavage efficiency for each class. Select nonpeptidic substrates were then directly converted to low molecular weight, novel aldehyde inhibitors with nanomolar affinity to cathepsin S. This study demonstrates the unique characteristics and merits of this first substrate-based method for the rapid identification and optimization of weak fragments and provides the framework for the development of completely nonpeptidic inhibitors to many different proteases.