The prokaryotic ATP-dependent protease machineries such as ClpQY and ClpAP in the malaria parasite may represent potential drug targets. In the present study, we show that the orthologue of cyanobacterial ClpP protease in Plasmodium falciparum (PfClpP) is expressed in the asexual blood stages and possesses serine protease activity. The PfClpP was localized in the apicoplast using a GFP-targeting approach, immunoelectron microscopy and by immunofluorescence assays. A set of cell permeable β-lactones, which specifically bind with the active site of prokaryotic ClpP, were screened using an in vitro protease assay of PfClpP. A PfClpP-specific protease inhibitor was identified in the screen, labelled as U1-lactone. In vitro growth of the asexual stage parasites was significantly inhibited by U1-lactone treatment. The U1-treated parasites showed developmental arrest at the late-schizont stage. We further show that the U1-lactone treatment resulted in formation of abnormal apicoplasts which were not able to grow and segregate in the parasite progeny; these effects were also evident by blockage in the replication of the apicoplast genome. Overall, our data show that the PfClpP protease has confirmed localization in the apicoplast and it plays important role in development of functional apicoplasts.