Accumulation of the β-amyloid (Aβ) peptides is one of the major pathologic hallmarks in the brains of Alzheimer's disease (AD) patients. Aβ is generated by sequential proteolytic cleavage of the amyloid precursor protein (APP) catalyzed by β- and γ-secretases. Inhibition of Aβ production by γ-secretase inhibitors (GSIs) is thus being pursued as a target for treatment of AD. In addition to processing APP, γ-secretase also catalyzes proteolytic cleavage of other transmembrane substrates, with the best characterized one being the cell surface receptor Notch. GSIs reduce Aβ production in animals and humans but also cause significant side effects because of the inhibition of Notch processing. The development of GSIs that reduce Aβ production and have less Notch-mediated side effect liability is therefore an important goal. γ-Secretase is a large membrane protein complex with four components, two of which have multiple isoforms: presenilin (PS1 or PS2), aph-1 (aph-1a or aph-1b), nicastrin, and pen-2. Here we describe the reconstitution of four γ-secretase complexes in Sf9 cells containing PS1--aph-1a, PS1--aph-1b, PS2--aph-1a, and PS2--aph-1b complexes. While PS1--aph-1a, PS1--aph-1b, and PS2--aph-1a complexes displayed robust γ-secretase activity, the reconstituted PS2--aph-1b complex was devoid of detectable γ-secretase activity. γ-Secretase complexes containing PS1 produced a higher proportion of the toxic species Aβ42 than γ-secretase complexes containing PS2. Using the reconstitution system, we identified MRK-560 and SCH 1500022 as highly selective inhibitors of PS1 γ-secretase activity. These findings may provide important insights into developing a new generation of γ-secretase inhibitors with improved side effect profiles.