Formation of senile plaques containing the beta-amyloid peptide (A beta) derived from the amyloid precursor protein (APP) is an invariant feature of Alzheimer's disease (AD). APP is cleaved either by beta-secretase or by alpha-secretase to initiate amyloidogenic (release of A beta) or nonamyloidogenic processing of APP, respectively. A key to understanding AD is to unravel how access of these enzymes to APP is regulated. Here, we demonstrate that lipid rafts are critically involved in regulating A beta generation. Reducing cholesterol levels in N2a cells decreased A beta production. APP and the beta-site APP cleavage enzyme (BACE1) could be induced to copatch at the plasma membrane upon cross-linking with antibodies and to segregate away from nonraft markers. Antibody cross-linking dramatically increased production of A beta in a cholesterol-dependent manner. A beta generation was dependent on endocytosis and was reduced after expression of the dynamin mutant K44A and the Rab5 GTPase-activating protein, RN-tre. This inhibition could be overcome by antibody cross-linking. These observations suggest the existence of two APP pools. Although APP inside raft clusters seems to be cleaved by beta-secretase, APP outside rafts undergoes cleavage by alpha-secretase. Thus, access of alpha- and beta-secretase to APP, and therefore A beta generation, may be determined by dynamic interactions of APP with lipid rafts.