A newly recognized Serratia species, termed South African Caenorhabditis briggsae isolate (SCBI), is both a mutualist of the nematode Caenorhabditis briggsae KT0001 and a pathogen of lepidopteran insects. Serratia sp. strain SCBI displays high proteolytic activity, and because secreted proteases are known virulence factors for many pathogens, the purpose of this study was to identify genes essential for extracellular protease activity in Serratia sp. strain SCBI and to determine what role proteases play in insect pathogenesis and cytotoxicity. A bank of 2,100 transposon mutants was generated, and six SCBI mutants with defective proteolytic activity were identified. These mutants were also defective in cytotoxicity. The mutants were found defective in genes encoding the following proteins: alkaline metalloprotease secretion protein AprE, a BglB family transcriptional antiterminator, an inosine/xanthosine triphosphatase, GidA, a methyl-accepting chemotaxis protein, and a PIN domain protein. Gene expression analysis on these six mutants showed significant downregulation in mRNA levels of several different types of predicted protease genes. In addition, transcriptome sequencing (RNA-seq) analysis provided insight into how inactivation of AprE, GidA, and a PIN domain protein influences motility and virulence, as well as protease activity. Using quantitative reverse transcription-PCR (qRT-PCR) to further characterize expression of predicted protease genes in wild-type Serratia sp. SCBI, the highest mRNA levels for the alkaline metalloprotease genes (termed prtA1 to prtA4) occurred following the death of an insect host, while two serine protease and two metalloprotease genes had their highest mRNA levels during active infection. Overall, these results indicate that proteolytic activity is essential for cytotoxicity in Serratia sp. SCBI and that its regulation appears to be highly complex.