Point mutations in the presenilin-1 gene (PS1) are a major cause of familial Alzheimer's disease. They result in a selective increase in the production of the amyloidogenic peptide amyloid-beta(1-42) by proteolytic processing of the amyloid precursor protein (APP). Here we investigate whether PS1 is also involved in normal APP processing in neuronal cultures derived from PS1-deficient mouse embryos. Cleavage by alpha- and beta-secretase of the extracellular domain of APP was not affected by the absence of PS1, whereas cleavage by gamma-secretase of the transmembrane domain of APP was prevented, causing carboxyl-terminal fragments of APP to accumulate and a fivefold drop in the production of amyloid peptide. Pulse-chase experiments indicated that PS1 deficiency specifically decreased the turnover of the membrane-associated fragments of APP. As in the regulation of cholesterol metabolism by proteolysis of a membrane-bound transcription factor, PS1 appears to facilitate a proteolytic activity that cleaves the integral membrane domain of APP. Our results indicate that mutations in PS1 that manifest clinically cause a gain of function and that inhibition of PS1 activity is a potential target for anti-amyloidogenic therapy in Alzheimer's disease.