The Alzheimer's amyloid beta protein (A beta) precursor (APP) is proteolytically cleaved by beta-secretase to N- and C-terminal fragments sAPPbeta and CTFbeta, respectively. Subsequently, CTFbeta is cleaved by gamma-secretase to generate A beta. We previously showed that the levels of secreted A beta and sAPPbeta were significantly reduced upon removal of glycosylphosphatidylinositol (GPI)-anchored proteins from either primary brain cells or Chinese hamster ovary cultures. The results indicated that GPI-anchored proteins facilitated beta-secretase activity. In this report, we strengthen the previous findings by demonstrating that CTFbeta, like sAPPbeta, is also reduced upon removal of GPI-anchored proteins and that sAPPbeta does not accumulate in an intracellular compartment. This facilitation pathway does not appear to be important for the processing of a disease-linked mutant form of APP (670NL), known to be a superior beta-secretase substrate. A novel aspartyl protease, BACE, responsible for beta-secretase activity in the brain is not GPI-anchored. However, BACE in brain membranes accumulate in lipid rafts, a compartment marked by the accumulation of GPI-anchored proteins. This finding is consistent with the hypothesis that BACE interacts with GPI-anchored proteins that facilitate its activity possibly by chaperoning it into lipid rafts.