During macroautophagy, the Atg8 protein is conjugated to phosphatidylethanolamine (PE) in autophagic membranes. In Apicomplexan parasites, two cysteine proteases, Atg4 and ovarian tumor unit (Otu), have been identified to delipidate Atg8 to release this protein from membranes. Here, we investigated the role of cysteine proteases in Atg8 conjugation and deconjugation and found that the Plasmodium parasite consists of both activities. We successfully disrupted the genes individually; however, simultaneously, they were refractory to deletion and essential for parasite survival. Mutants lacking Atg4 and Otu showed normal blood and mosquito stage development. All mice infected with Otu KO sporozoites became patent; however, Atg4 KO sporozoites either failed to establish blood infection or showed delayed patency. Through in vitro and in vivo analysis, we found that Atg4 KO sporozoites invade and normally develop into early liver stages. However, nuclear and organelle differentiation was severely hampered during late stages and failed to mature into hepatic merozoites. We found a higher level of Atg8 in Atg4 KO parasites, and the deconjugation of Atg8 was hampered. We confirmed Otu localization on the apicoplast; however, parasites lacking Otu showed no visible developmental defects. Our data suggest that Atg4 is the primary deconjugating enzyme and that Otu cannot replace its function completely because it cleaves the peptide bond at the N-terminal side of glycine, thereby irreversibly inactivating Atg8 during its recycling. These findings highlight a role for the Atg8 deconjugation pathway in organelle biogenesis and maintenance of the homeostatic cellular balance.