Compelling evidence suggests that N-terminally truncated and pyroglutamyl-modified amyloid-beta (Abeta) peptides play a major role in the development of Alzheimer's disease. Posttranslational formation of pyroglutamic acid (pGlu) at position 3 or 11 of Abeta implies cyclization of an N-terminal glutamate residue rendering the modified peptide degradation resistant, more hydrophobic, and prone to aggregation. Previous studies using artificial peptide substrates suggested the potential involvement of the enzyme glutaminyl cyclase in generation of pGlu-Abeta. Here we show that glutaminyl cyclase (QC) catalyzes the formation of Abeta 3(pE)-40/42 after amyloidogenic processing of APP in two different cell lines, applying specific ELISAs and Western blotting based on urea-PAGE. Inhibition of QC by the imidazole derivative PBD150 led to a blockage of Abeta 3(pE)-42 formation. Apparently, the QC-catalyzed formation of N-terminal pGlu is favored in the acidic environment of secretory compartments, which is also supported by double-immunofluorescence labeling of QC and APP revealing partial colocalization. Finally, initial investigations focusing on the molecular pathway leading to the generation of truncated Abeta peptides imply an important role of the amino acid sequence near the beta-secretase cleavage site. Introduction of a single-point mutation, resulting in an amino acid substitution, APP(E599Q), i.e., at position 3 of Abeta, resulted in significant formation of Abeta 3(pE)-40/42. Introduction of the APP KM595/596NL "Swedish" mutation causing overproduction of Abeta, however, surprisingly diminished the concentration of Abeta 3(pE)-40/42. The study provides new cell-based assays for the profiling of small molecule inhibitors of QC and points to conspicuous differences in processing of APP depending on sequence at the beta-secretase cleavage site.