There is an increasing need to rapidly determine the specificity of proteases that potentially play a role in human and animal disease. Substrates for novel proteases can be discovered by testing standard protease substrates such as oxidized insulin B-chain, by screening commercially available substrates for other proteases, or by preparing derivatives of known biological targets. The relative importance of each substrate residue can be determined through alanine-scanning, or by preparing incremental changes at one or more positions within the known substrate. More efficient methods such as coupled liquid chromatography - mass spectrometry (LC-MS) or C-terminal / N-terminal sequencing of reaction products allow the selection of improved substrates from mixtures of peptides. In other cases mixtures of substrates can be spatially segregated prior to protease treatment during chemical synthesis on beads or membranes. Positional scanning libraries can be used to find substrates for proteases with interdependent subsites, while minimizing required synthetic and screening effort. As proteases catalyze both hydrolysis and amide bond formation, acyl transfer from protease-substrate intermediates to mixtures of peptide nucleophiles provide substrate sequence information. Genetic methods including substrate phage display, retroviral display, bacterial display, and yeast a-halo assays combine selection with the ability to propagate selected sequences and directly deconvolute the cleaved peptide via sequencing of substrate-coding DNA. This review describes various methods for optimizing protease substrates for biological activity and the use of optimized substrates in pharmaceutical discovery.