Amyloid peptide (Aβ) is generated by sequential cleavage of the amyloid precursor protein (APP) by β-secretase (Bace1) and γ-secretase. Aβ production increases after plasma membrane cholesterol loading through unknown mechanisms. To determine how APP-Bace1 proximity affects this phenomenon, we developed a fluorescence lifetime imaging microscopy-Förster resonance energy transfer (FLIM-FRET) technique for visualization of these molecules either by epifluorescence or at the plasma membrane only using total internal reflection fluorescence. Further, we used fluorescence correlation spectroscopy to determine the lipid rafts partition of APP-yellow fluorescent protein (YFP) and Bace1-green fluorescent protein (GFP) molecules at the plasma membrane of neurons. We show that less than 10 min after cholesterol exposure, Bace1-GFP/APP-mCherry proximity increases selectively at the membrane and APP relocalizes to raft domains, preceded by rapid endocytosis. After longer cholesterol exposures, APP and Bace1 are found in proximity intracellularly. We demonstrate that cholesterol loading does not increase Aβ production by having a direct impact on Bace1 catalytic activity but rather by altering the accessibility of Bace1 to its substrate, APP. This change in accessibility is mediated by clustering in lipid rafts, followed by rapid endocytosis.