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 MAP1LC3 and GABARAPL2, to reveal a C-terminal glycine (By similarity). 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 (By similarity). In addition to the protease activity, also mediates delipidation of ATG8 family proteins. Catalyzes delipidation of PE-conjugated forms of ATG8 proteins during macroautophagy. Also involved in non-canonical autophagy, a parallel pathway involving conjugation of ATG8 proteins to single membranes at endolysosomal compartments, by catalyzing delipidation of ATG8 proteins conjugated to phosphatidylserine (PS) (By similarity). ATG4D plays a role in the autophagy-mediated neuronal homeostasis in the central nervous system (PubMed:25875846). Compared to other members of the family (ATG4A, ATG4B or ATG4C), constitutes the major protein for the delipidation activity, while it promotes weak proteolytic activation of ATG8 proteins (By similarity). Involved in phagophore growth during mitophagy independently of its protease activity and of ATG8 proteins: acts by regulating ATG9A trafficking to mitochondria and promoting phagophore-endoplasmic reticulum contacts during the lipid transfer phase of mitophagy (By similarity). Plays a role as an autophagy regulator that links mitochondrial dysfunction with apoptosis. The mitochondrial import of ATG4D during cellular stress and differentiation may play important roles in the regulation of mitochondrial physiology, ROS, mitophagy and cell viability. [protein]-C-terminal L-amino acid-glycyl-phosphatidylethanolamide + H2O = [protein]-C-terminal L-amino acid-glycine + a 1,2-diacyl-sn-glycero-3-phosphoethanolamine [protein]-C-terminal L-amino acid-glycyl-phosphatidylserine + H2O = [protein]-C-terminal L-amino acid-glycine + a 1,2-diacyl-sn-glycero-3-phospho-L-serine Inhibited by N-ethylmaleimide. Imported into mitochondrial matrix after cleavage by CASP3 during oxidative stress and cell death. The cryptic mitochondrial transit peptide is revealed after cleavage by caspase upon oxidative stress and cell death. It acts then as a functional transit peptide, and allows the import of the cleaved protein into the mitochondria. Cleaved by CASP3 during apoptosis which leads to increased activity. The cleavage by CASP3 reveals a cryptic mitochondrial targeting sequence immediately downstream of their canonical caspase cleavage sites which leads to mitochondrial import of the protein. Defects in ATG4D are the cause of a neurodegenerative disease present in the Lagotto Romagnolo dog breed (PubMed:25875846). Affected dogs suffer from progressive cerebellar ataxia, sometimes accompanied by episodic nystagmus and behavioral changes (PubMed:25875846). Defects are caused by impaired autophagy: neuronal cells display cytoplasmic vacuolization in the nervous system, as well as spheroid formation and cytoplasmic aggregation of vacuoles in secretory epithelial tissues and mesenchymal cells (PubMed:25875846). Belongs to the peptidase C54 family.