Cisplatin-based chemotherapy remains the primary treatment for unresectable and metastatic muscle-invasive bladder cancers (MIBCs). However, tumors frequently develop chemoresistance. Here, we established a primary and orthotopic MIBC mouse model with gene-edited organoids to recapitulate the full course of chemotherapy in patients. We found that partial squamous differentiation, called semi-squamatization, is associated with acquired chemoresistance in both mice and human MIBCs. Multi-omics analyses showed that cathepsin H (CTSH) is correlated with chemoresistance and semi-squamatization. Cathepsin inhibition by E64 treatment induces full squamous differentiation and pyroptosis, and thus specifically restrains chemoresistant MIBCs. Mechanistically, E64 treatment activates the tumor necrosis factor pathway, which is required for the terminal differentiation and pyroptosis of chemoresistant MIBC cells. Our study revealed that semi-squamatization is a type of lineage plasticity associated with chemoresistance, suggesting that differentiation via targeting of CTSH is a potential therapeutic strategy for the treatment of chemoresistant MIBCs. Keywords: E64; MIBC; TNF pathway; acquired chemoresistance; cathepsin H; differentiation therapy; lineage plasticity; pyroptosis; semi-squamatization.