A neuropathological hallmark of Alzheimer's disease is the deposition of amyloid-beta (Abeta) peptides in senile plaques in the hippocampus and cerebral cortex. Abeta is derived from larger integral membrane proteins termed amyloid precursor proteins (APP). We demonstrated previously that APP, synthesized by neurons in the entorhinal cortex, is transported via the perforant pathway to presynaptic terminals in the dentate gyrus. We reported that, although full-length APP and membrane-tethered, C-terminal APP derivatives (APP-CTFs) accumulate at terminal fields, the production of Abeta peptides at these sites was indeterminate. To test the hypothesis that APP-CTFs, generated from axonally transported APP, are further metabolized to Abeta peptides that are subsequently released and deposited proximal to nerve terminals, we created unilateral knife lesions of the perforant pathway of transgenic mice that exhibit hippocampal amyloid deposits. We observed pronounced reductions in amyloid burden in the ipsilateral dentate gyrus, findings that lead us to conclude that axonally transported APP gives rise to Abeta peptides that are released from presynaptic sites in the dentate gyrus and deposited in extracellular plaques. Moreover, our findings are consistent with the view that Abeta deposits are dynamic structures and that the perforant path lesion alters the equilibrium between Abeta production-deposition toward clearance as a consequence of blocked axonal transport of APP from the entorhinal cortex to terminal fields in the hippocampus.