Although gamma-secretase is recognized as a therapeutic target for Alzheimer's disease, side effects associated with strong inhibition of this aspartyl protease raised serious concerns regarding this therapeutic strategy. However, it is not known whether moderate inhibition of this enzyme will allow dissociation of beneficial effects in the CNS from mechanism-based toxicities in the periphery. We tested this possibility by using a series of mice with genetic reduction of gamma-secretase (levels ranging from 25 to 64% of control mice). Here, we document that even 30% reduction of gamma-secretase can effectively ameliorate amyloid burden in the CNS. However, global reduction of this enzyme below a threshold level increased the risk of developing squamous cell carcinoma as well as abnormal proliferation of granulocytes in a gamma-secretase dosage-dependent manner. Importantly, we demonstrate that there exists a critical gamma-secretase level that reduces the risk of amyloidosis in the CNS and limits tumorigenesis in epithelia. Our findings suggest that moderate inhibition of gamma-secretase represents an attractive anti-amyloid therapy for Alzheimer's disease.