We found previously by fluorescence resonance energy transfer experiments that amyloid precursor protein (APP) homodimerizes in living cells. APP homodimerization is likely to be mediated by two sites of the ectodomain and a third site within the transmembrane sequence of APP. We have now investigated the role of the N-terminal growth factor-like domain in APP dimerization by NMR, biochemical, and cell biological approaches. Under nonreducing conditions, the N-terminal domain of APP formed SDS-labile and SDS-stable complexes. The presence of SDS was sufficient to convert native APP dimers entirely into monomers. Addition of an excess of a synthetic peptide (APP residues 91-116) containing the disulfide bridge-stabilized loop inhibited cross-linking of pre-existing SDS-labile APP ectodomain dimers. Surface plasmon resonance analysis revealed that this peptide specifically bound to the N-terminal domain of APP and that binding was entirely dependent on the oxidation of the thiol groups. By solution-state NMR we detected small chemical shift changes indicating that the loop peptide interacted with a large protein surface rather than binding to a defined pocket. Finally, we studied the effect of the loop peptide added to the medium of living cells. Whereas the levels of alpha-secretory APP increased, soluble beta-cleaved APP levels decreased. Because Abeta40 and Abeta42 decreased to similar levels as soluble beta-cleaved APP, we conclude either that beta-secretase binding to APP was impaired or that the peptide allosterically affected APP processing. We suggest that APP acquires a loop-mediated homodimeric state that is further stabilized by interactions of hydrophobic residues of neighboring domains.