Cysteine protease that plays a key role in autophagy by mediating both proteolytic activation and delipidation of ATG8 family proteins. The protease activity is required for proteolytic activation of ATG8 family proteins: cleaves the C-terminal amino acid of ATG8 proteins to reveal a C-terminal glycine. Exposure of the glycine at the C-terminus is essential for ATG8 proteins conjugation to phosphatidylethanolamine (PE) and insertion to membranes, which is necessary for autophagy. Protease activity is also required to counteract formation of high-molecular weight conjugates of ATG8 proteins (ATG8ylation): acts as a deubiquitinating-like enzyme that removes ATG8 conjugated to other proteins, such as ATG3. In addition to the protease activity, also mediates delipidation of ATG8 family proteins. Catalyzes delipidation of PE-conjugated forms of ATG8 proteins during macroautophagy. [protein]-C-terminal L-amino acid-glycyl-phosphatidylethanolamide + H2O = [protein]-C-terminal L-amino acid-glycine + a 1,2-diacyl-sn-glycero-3-phosphoethanolamine The LIR motif (LC3-interacting region) is required for the interaction with the ATG8 family proteins. Required for proteolytic activation and delipidation of ATG8 proteins. Belongs to the peptidase C54 family.