Alzheimer's disease (AD) is a complex, neurodegenerative disease characterized by the impairment of cognitive function in elderly individuals. In a recent global gene expression study of APP transgenic mice, we found elevated expression of mitochondrial genes, which we hypothesize represents a compensatory response because of mitochondrial oxidative damage caused by the over-expression of mutant APP and/or amyloid beta (Abeta). We investigated this hypothesis in a series of experiments examining what forms of APP and Abeta localize to the mitochondria, and whether the presence of these species is associated with mitochondrial dysfunction and oxidative damage. Using immunoblotting, digitonin fractionation, immunofluorescence, and electron microscopy techniques, we found a relationship between mutant APP derivatives and mitochondria in brain slices from Tg2576 mice and in mouse neuroblastoma cells expressing mutant human APP. Further, to determine the functional relationship between mutant APP/Abeta and oxidative damage, we quantified Abeta levels, hydrogen peroxide production, cytochrome oxidase activity and carbonyl proteins in Tg2576 mice and age-matched wild-type (WT) littermates. Hydrogen peroxide levels were found to be significantly increased in Tg2576 mice when compared with age-matched WT littermates and directly correlated with levels of soluble Abeta in Tg2576 mice, suggesting that soluble Abeta may be responsible for the production of hydrogen peroxide in AD progression in Tg2576 mice. Cytochrome c oxidase activity was found to be decreased in Tg2576 mice when compared with age-matched WT littermates, suggesting that mutant APP and soluble Abeta impair mitochondrial metabolism in AD development and progression. An increase in hydrogen peroxide and a decrease in cytochrome oxidase activity were found in young Tg2576 mice, prior to the appearance of Abeta plaques. These findings suggest that early mitochondrially targeted therapeutic interventions may be effective in delaying AD progression in elderly individuals and in treating AD patients.