The beta-amyloid protein (Abeta) is derived by proteolytic processing of the amyloid protein precursor (APP). Cleavage of APP by beta-secretase generates a C-terminal fragment (APP-CTFbeta), which is subsequently cleaved by gamma-secretase to produce Abeta. The aim of this study was to examine the cleavage of APP-CTFbeta by gamma-secretase in primary cortical neurons from transgenic mice engineered to express the human APP-CTFbeta sequence. Neurons were prepared from transgenic mouse cortex and proteins labelled by incubation with [35S]methionine and [35S]cysteine. Labelled APP-CTFbeta and Abeta were then immunoprecipitated with a monoclonal antibody (WO2) specific for the transgene sequences. Approximately 30% of the human APP-CTFbeta (hAPP-CTFbeta) was converted to human Abeta (hAbeta), which was rapidly secreted. The remaining 70% of the hAPP-CTFbeta was degraded by an alternative pathway. The cleavage of hAPP-CTFbeta to produce hAbeta was inhibited by specific gamma-secretase inhibitors. However, treatment with proteasome inhibitors caused an increase in both hAPP-CTFbeta and hAbeta levels, suggesting that the alternative pathway was proteasome-dependent. A preparation of recombinant 20S proteasome was found to cleave a recombinant cytoplasmic domain fragment of APP (APPcyt) directly. The study suggests that in primary cortical neurons, APP-CTFbeta is degraded by two distinct pathways, one involving gamma-secretase, which produces Abeta, and a second major pathway involving direct cleavage of APP-CTFbeta within the cytoplasmic domain by the proteasome. These results raise the possibility that defective proteasome function could lead to an increase in Abeta production in the AD brain.