A central question in Alzheimer's disease concerns the mechanism by which beta-amyloid contributes to neuropathology, and in particular whether intracellular versus extracellular beta-amyloid plays a critical role. Alzheimer transgenic mouse studies demonstrate brain dysfunction, as beta-amyloid levels rise, months before the appearance of beta-amyloid plaques. We have now used immunoelectron microscopy to determine the subcellular site of neuronal beta-amyloid in normal and Alzheimer brains, and in brains from Alzheimer transgenic mice. We report that beta-amyloid 42 localized predominantly to multivesicular bodies of neurons in normal mouse, rat, and human brain. In transgenic mice and human Alzheimer brain, intraneuronal beta-amyloid 42 increased with aging and beta-amyloid 42 accumulated in multivesicular bodies within presynaptic and especially postsynaptic compartments. This accumulation was associated with abnormal synaptic morphology, before beta-amyloid plaque pathology, suggesting that intracellular accumulation of beta-amyloid plays a crucial role in Alzheimer's disease.