A Drosophila gene [amyloid protein precursor-like (Appl)] has recently been identified whose predicted amino acid sequence (APPL) shares extensive homology with the beta-amyloid protein precursor (APP) associated with Alzheimer's disease. Characterization of proteins encoded by the Appl gene was initiated with the expectation that this simple model system might help elucidate the basic function provided by APPL and APP proteins. In this report, we identify 2 forms of the APPL protein in embryonic extracts, primary cultures, and transfected cells. APPL is synthesized as a 145-kDa membrane-associated precursor that is converted to a 130-kDa secreted form that lacks the cytoplasmic domain. Both forms are N-glycosylated. Pulse-chase and subcellular localization studies suggest that the conversion is very rapid. The similarities of biogenesis between APP and APPL provide further evidence that APPL and APP might be functionally homologous, and that the secretion event is of physiological significance. Immunocytochemical studies show that the APPL proteins are first detected in developing neurons concomitant with axonogenesis and remain associated with differentiated neurons. APPL immunoreactivity was observed in neuronal cell bodies, axonal tracts, and neuropil regions. In the embryo, APPL proteins are expressed exclusively in the CNS and PNS neurons, consistent with the Appl transcript localization. The expression pattern of APPL proteins suggests an ancestral function for this protein in the nervous system.