Apolipoprotein (apo) E4 is a major risk factor for Alzheimer disease. Although the mechanisms remain to be determined, the detrimental effects of apoE4 in neurobiology must be based on its unique structural and biophysical properties. One such property is domain interaction mediated by a salt bridge between Arg-61 in the N-terminal domain and Glu-255 in the C-terminal domain of apoE4. This interaction, which does not occur in apoE3 or apoE2, causes apoE4 to bind preferentially to certain lipoprotein particles in vitro and in vivo. Here we used fluorescence resonance energy transfer (FRET) to determine whether apoE4 domain interaction occurs in living neuronal cells. Neuro-2a cells were transfected with constructs encoding apoE3 or apoE4 in which yellow fluorescent protein (YFP) was fused to the N terminus, and cyan fluorescent protein (CFP) was fused to the C terminus. To generate a FRET signal that can be detected by spectrum confocal microscopy, the labeled N and C termini must be in close proximity (<100 A). FRET signals occurred in cells transfected with YFP-apoE4-CFP but not in those transfected with YFP-apoE3-CFP, suggesting that the N and C termini of apoE4 are in close proximity in living cells and that those of apoE3 are not. FRET signals did not occur in cells cotransfected with YFP-apoE4 and apoE4-CFP, suggesting that the FRET in YFP-apoE4-CFP-transfected cells was intramolecular. Mutation of Arg-61 to Thr or Glu-255 to Ala in apoE4, which disrupts domain interaction, abolished FRET in Neuro-2a cells, strongly suggesting that the FRET in YFP-apoE4-CFP cells was caused by domain interaction. ApoE4-producing cells secreted less phospholipid than apoE3-producing cells, but after disruption of domain interaction in apoE4, phospholipid secretion increased to the levels seen with apoE3, suggesting that domain interaction decreases the phospholipid-binding capacity of apoE4. Thus, apoE4 domain interaction occurs in living neuronal cells and may be a molecular basis for apoE4-related neurodegeneration.