Abstract Widespread use of sensitive imaging in clinical practice has resulted in incidental thyroid nodules being discovered with increasing frequency, creating a unique opportunity to detect and remove lesions at early stages of malignancy. The majority of these incidental nodules remain benign and asymptomatic, but 10-20% are found to be malignant on surgical excision, resulting in a critical need for improved diagnostics, as 75% of patients currently undergo unnecessary thyroidectomies to remove benign nodules. The current standard of care includes collecting a tissue biopsy by ultrasound-guided fine needle aspiration: these samples are tested by cytology, which looks for aberrant cells, and for genetic risk markers. These diagnostic tests are characterized by poor specificity, and a third of all tested nodules are still classified as indeterminate and need to be resected for a pathological diagnosis. We originally hypothesized that dysregulated proteolysis, a type of enzyme activity that is a hallmark of invasive cancer, might yield discriminating levels of activity in FNA tissue from benign and malignant nodules. In Phase I work, we leveraged the Alaunus Biosciences, Inc. diagnostic pipeline, a platform that allows innovative proteomics-based biomarker discovery, to identify and characterize a set of protease activities (functional markers) that are significantly increased in malignant nodules. We then developed fluorogenic substrate assays to monitor these activities using small volumes of biological samples. In parallel, we also discovered additional mass-based markers that can be measured with standard antibody-based assays. Our investigational multi-analyte diagnostic assay has the potential to differentiate malignant from benign thyroid tissue with sensitivity and specificity >90%. In this Phase II proposal, we aim to perform technical and clinical validation studies required to advance the assay to readiness for clinical use in the early diagnosis of indeterminate thyroid nodules. In Aim 1, we will benchmark the clinical utility of our selected protein and functional biomarkers in surgical tissue to evaluate scoring, establish diagnostic thresholds, and report on key assay parameters. In Aim 2, we will perform a comprehensive technical assessment of the laboratory performance of the assay to satisfy industry standards. In Aim 3, we will create an independent cohort of FNA tissue samples, through our IRB- approved biobanking efforts at UCSF, UCLA and IU, to be used for a robust prospective validation of the clinical usefulness of the assay. Our goal is to develop a rapid assay that improves patient stratification over current standard diagnostic markers, guides clinical decision-making to avoid unnecessary surgical intervention, and transforms the clinical management of these challenging lesions.