Lactacystin, a specific inhibitor of proteasomes in eukaryotic cells, did not block parasite entry or the establishment of the parasitophorous vacuole, but did inhibit parasite growth and daughter cell budding, as well as DNA synthesis. Two other proteasome inhibitors, MG-132 and proteasome inhibitor 1, also blocked parasite growth and intracellular development. Adding lactacystin to established, dividing parasites, rapidly blocked parasite growth and daughter cell budding at all stages in the process. Pre-treating host cells with lactacystin did not block parasite entry or development. Moreover, under the conditions used, the host cells appeared not to be adversely affected indicating that host cell proteasome activity was not essential for parasite entry or development. Concomitant with these effects on parasite growth and division were morphological changes in the parasite including the appearance of whorls of ER-derived membranes presumably related to the failure to breakdown misfolded proteins. These changes were specific to lactacystin and were not seen in parasites treated with other protease inhibitors. Although the ER-derived structures resembled autophagic bodies, similar structures could not be induced by serum starvation nor did the membranous whorls acidify or undergo morphological changes consistent with autophagosomal maturation. These results highlight the possible role of proteasome activity in Toxoplasma in intracellular development and the regulation of parasite replication. However, how the dividing parasite recycles its organelles and the functional relationship between any lysosomal–autophagic pathway and proteasomes in the parasite remains unresolved.