The presenilin (PS)/gamma-secretase complex proteolytically cleaves more than 20 different proteins in addition to the amyloid precursor protein (APP). These substrates are almost exclusively type I membrane proteins. Many undergo internalization from the cell surface followed by degradation or recycling back to the plasma membrane through the endocytic recycling compartment (ERC). Evidence shows that the PSs also regulate intracellular trafficking of APP and its C-terminal fragments (CTFs). To investigate whether PS/gamma-secretase activity is required for normal endosomal recycling, we performed live cell imaging experiments with fluorescently labeled transferrin, reported to specifically traffic through the ERC. By using pharmacological gamma-secretase inhibitors or cell lines lacking functional PS/gamma-secretase, here we show that PS/gamma-secretase activity is required for clearance of transferrin from the ERC. Interestingly, lack of PS/gamma-secretase function also resulted in the accumulation of APP and APP-CTFs in the ERC in addition to the cell surface. Familial Alzheimer's disease mutations in APP-CTFs did not affect endocytic recycling of these proteins. Our results suggest that PS/gamma-secretase activity is required for normal endosomal recycling of soluble and membrane-associated proteins through the ERC and propose a new mechanism by which impaired PS/gamma-secretase function may eventually contribute to neurodegeneration.